Do you get a deposit when the contract is signed? Under what circumstances would you return the deposit?
How far ahead do you book yourself for? (just being optimistic)
Rich Beckman
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story
The FHB Podcast team weighs in on Building Science career questions.
Featured Video
Highlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
Never use to, now I get 20-30% up front to schedule a job. I've heard rumors from customers about guys who will sign your contract as a means of getting in the schedule only to use that time to shop bids and see how much better they can get. 10% is non-refundable(for wasting my time) and it keeps everybody honest. They've got my reputation to bank on and I have some of there dead heads. I only ever had one guy bi-ch about it, we did his job and he is now one of my more vocal advertisers.
Being a student of Lykos U., I have stipulated in the contract that a full material deposit is required and that the job will not be scheduled nor will the materials be ordered until that is received and deposited. I've never had anyone complain so far. as so many here have said we are not banks. for most of my jobs the materials range anywhere from 25% to 50%. there are a few rare instances where I will get the materials in advance and do a T&M billing but that's usually for my close neighbors and friends who I am sure are good for the payments.Steve
S.J.MERRETTE Carpentry & Construction • Robesonia, PA
Nothing is impossible...It just hasn't been done yet.
OK Steve. Between that clause in your contract and some of your other accomplishments so far, you deserve an "Associates Degree." If by the end of this fall you're booked up for a good part of the winter, I'll earn the B. A. certificate.
Take excellent care of that data base of clients you're developing.
Edited 3/26/02 12:48:39 AM ET by Sonny
Sonny, someday maybe I'll get my M.S. or better yet, my Phd!Steve
S.J.MERRETTE Carpentry & Construction • Robesonia, PA
Nothing is impossible...It just hasn't been done yet.
If I'm still around I'll make sure you get both, but remember, the BA comes before them. The student must be better than his teacher. Then it will be your responsibility to become the teacher. That's how you pay back your own teachers, and I'm sure you will.
Would it be a B.A. or a B.S.? Art or Science? isn't what we do a little of both after all.Steve
S.J.MERRETTE Carpentry & Construction • Robesonia, PA
Nothing is impossible...It just hasn't been done yet.
It's a B/A-S
Just to clarify, I don't hesitate to ask for enough money up front to cover materials (although I still ask for it the day work commences). Do you really ask for money to cover materials at the signing of the contract? What if the job is still a month or two away? (Okay, if you're special ordering stuff that far ahead of time, but otherwise...?)
Rich Beckman
Rich, We specialize in remodeling, so my draws are probably smaller than some of the builders here. I get one to two thousand at the signing of the contract if work is going to start within 7 - 10 days of signing. If they are signing the contract to get on my schedule 3 or 4 months down the road, I get a non- refundable $500.00 deposit that is credited to materials once the job starts.
As work progresses I present the customer with a weekly material account summary, that shows materials purchased and the amount of money they have left "on deposit" with me. When the material money gets low they write another check. Unless I have a large amount of materials or an expensive special order coming in, I never have more than $1,500.00 to $2,500.00 of their money. This has worked well for me. I don't finance the project and they don't feel like I am trying to con them out of their money. TCW Specialists in Custom Remodeling.
Rich, Unfortunately I haven't had the problem of being booked out a month or two yet. most of my jobs come along in the middle of another and they just become the next one I go to. I only hope that eventually I will have the phone ringing that much that I have to "schedule" jobs. like I said so far it's pretty much paycheck to paychek so to speak. thus, hence and therefore some of my posts of desparation last month.Steve
S.J.MERRETTE Carpentry & Construction • Robesonia, PA
Nothing is impossible...It just hasn't been done yet.
I agree, Steve. I've never had a problem asking my clients to pay for materials up front. I also think its the proper thing to do. I suppose if I was in a different market things might have to be done differently. But I stick to remodeling, repair and additions most of the time. My clients seem to understand. I'm selling my time. I'm not interested in selling materials, nor am I interested in financing their project.
By the way Steve, off the subject: I like the business name you have chosen for yourself. I followed your thread on that. (on the good old board...those were the days) I like it because your name, Merrette, is a visually memorable and interesting name. Double r, double t and three "e's" It stands out. Its one of the things I like about my own business name, Mjollnir Construction. Tom
Thank you Thomas.Steve
S.J.MERRETTE Carpentry & Construction • Robesonia, PA
Nothing is impossible...It just hasn't been done yet.
Rich,
I get 50% up front. The remaining 50% is due upon completion of the job. Every job is done on a signed contract basis only. The payor has the right to inspect the job to ascertain that it has been done according to contract specifications. If the situation requires it, I will allow up to 3 days for the inspection after the job is completed, and I get my final check - I haven't had to use this option yet as most people are happy to see us on the job and finished. We do good work so the payment is usually waiting for us - some have even paid us before the contract was finished! In the past 15 years I did get bagged twice - once was on a job without a contract - first and only time - never again. On the second job the project got into financial difficulty and the IRS stepped in - kissed everything good-bye on that one, but this is rare.
I have no difficulty in asking for the 50% deposit up front. There are too many variables out there that can eat your lunch. You need to cover yourself. I've had only one person refuse to make this deposit, and I walked away from her. It was difficult, but later I heard from someone who did the job - they got stiffed, and she professed to be a born again Christian who went to church 2x/week. You just never know!!! Come to think of it, a roofer who tried to stiff me once had the same line. It must be a popular con-line with some. My advice if you ever hear it is - beware!
Cliff. J.
Some interesting posts.
But they don't say for what the contracts are for
From the other side:
a 50% deposit on a $1000 dollar job where you have to buy materials and will start day after tomorrow is one thing
a 50% deposit on a $50,000 dollar remodel that will start in 6 months is something else "I'm not a banker to finance your company"
If someone takes offence at that, it was not ment as such.
Deposits need to be in perspective.
Trust is a two way street. Good business sense also is a two way street.the two are not mutually exclusiveboblVolo Non Voleo 8Joe's cheat sheet
Most of my work is in the $2000-20,000 range. We are often backed up 6 weeks or more, so I get a $250 deposit to secure a tentative start date (get on the schedule), 50% of contract amount when we start, and balance on completion. Sometimes I'll do thirds on jobs over $10-12,000.Bear
Good point - we get our 50% down just before we order the materials for the job which is usually about 10-14 days before we start. We'll take a non-refundable 5% down to get "in line", if the time frame is no more than a few weeks to a few months off; otherwise, we wait and hope that they come online when the time is right. We're not out to "skin" anyone. In fact after the 9/11 disaster we ripped up an almost $40,000 contract because it was obvious that the motel's business was hurting with the downturn in business and simply couldn't comply. Hopefully something good will come of that somewhere down the road.
Cliff.
My approach was...
Figure everything possible. Decide on a number. Double that number.
If accepted, to start work, all materials and 50% of labor down. At half completion, 25% labor. At completion, 15% labor, and 10% labor two weeks after completion. This left the customer feeling they were holding some sort of 'card' to make sure any mistakes would be fixed even after completion.
It's been many years. I don't know if I would do it exactly the same today, but it worked pretty good back then.
Working in the peoples republic of Maryland you can only collect 30 percent at contract signing. They then have 72 hours to cancel the contract for any reason and you must return 100 percent of the deposit. As part of the contract you must verbally explain this to the customer and have them sign that they understand their cancellation rights. After that it's alot of legal mumbo jumbo of the customers legal rights.
I love Maryland where our state motto is:
If you can dream it we will tax it.
Obviously this is something we all think about, so it's good to compare notes.
I think it's relative to the size of the job.
At contract signing, I have a pretty good feeling as to whether or not I trust these people, otherwise we haven't gotten that far. As a rule, I am looking for something to keep them honest and/or pay for my time to date. So at least three hundred bucks maybe up to a couple thousand, nonrefundable. That gets you on the schedule, which at this time is a place the customer should feel happy to be. I try to see it from the customer's perspective. I like to get maybe $300 on 5K job, maybe 2K on a 100K job. I still work some jobs on a handshake. I have never, I repeat, never been burned in 12 years.
Once I have a signed contract, I'm a real stickler on getting my draws. I take as many as I think I need, all tied to production. I have no problem with 10 draws on a larger job.
I would never wait for 50% on completion, unless it was under 5K or so. I guess the key is don't stick your neck out for if you can't eat it.
Tom
Luka-Bout time you changed your name to your favorite color
GreenBob
"Rather be a hammer than a nail"
My Jobs are usually $5,000-$20,000 . I ask for 40% upon delivery of materials, 40% at 80% completion, and 20% at completion . I've only had one customer cancel a signed proposal which didn't effect my schedule that bad because all I did was slide everyone else forward to fill that time slot.Bob
"Rather be a hammer than a nail"
Interesting topic! All of the points of view suggested have merit.
My two cents.....for what it's worth......I won't ask for any money when a contract is signed and the job is tentatively scheduled, let's say 6-8 weeks ahead (as most are). Unless of course, certain merchandise needs to be ordered that far in advance.
Now I don't know about any other contractors, but for me to be able to pinpoint an exact starting date for any job that far in advance is the equivalent to predicting the weather. You know that once you're on someone's job, often enough you end up doing other things for them and soon, a 4 week job turns into a 5 week project. Not to mention any weather delays or ordered material not showing up on time, or damaged en route, or backordered,and subs nowhere to be found, etc, etc.....You all know the drill.
I've found that once you take a deposit from people in the interests of "commitment", you can bet your life that as soon as that starting date rolls around, you had better be sitting in their driveway ready to go. If not, be prepared to spend an awful lot of time on the phone with assurances and other platitudes you can lay on them until you can get to their job. Explaining that Mrs. Smith's vanity cabinet you waited 3 weeks for came in damaged and had to go back so the plumber couldn't finish his portion and we couldn't put the mirrors in until......well, you know.
Those telephone conversations seem to be alot more palatable to clients when you don't have their money in your pocket. It just seems to me that there are ENOUGH fires to put out during the normal course of the day without starting any myself.
Like bobl said, diff jobs have diff requirements. I do jobs from $1000. to $380,000.
Thirty percent of the latter would be enough to run off to Mexico with, if I were of that frame of mind.
As a general rule, I ask for 30% with the contract, which stipulates that any cancellation by the customer will result in forfeiture of the deposit because of time and commitments invested on my part in prep and design work.
But on a job that is expected to run more than two months, I just ask for draws up front of the estimated needs for that month, generally no more than $50,000 at a time.
I mostly work time and materials billing but on a firm bid contract, the draws are based on predetermined points of comnpletion, designed to keep me from holding an empty bag.Excellence is its own reward!
I'm in general agreement with most of you guys, but I get PAID when the contract is signed not only to secure funds for materials, scheduals and all that other blather, but I mostly get PAID an amount because I've EARNED IT!
Yes, it's know as paying the salesman.
If you made the sale, you should pay yourself for completing that most important task. And you should consider it as compensation. Not a deposit.
So if a jobs worth $100,000.00, you should decide what you need for material/scheduals-ect..........and add on what the sales worth.....be objective........you'll find yourself collecting much larger deposits!
Also, on the subject of refunding a deposit, you should have language in your contract concerning "liquidated damages".
Talk to your lawyer.....
Mark,
I am not disagreeing with your statement regarding "liquidated damages" but that is a can of worms in itself.
Don't forget that a contract is a two way street.
bobl Volo Non Voleo Joe's cheat sheet
Right you are, bobl, that can of worms should be discussed with a lawyer rather than a bunch of contractors.