Scenario: A contractor is new to a customer. No bad references. His quote requests a “down payment”. Owner rejects the down payment and offers too pay for all materials when delivered to the jobsite (check at time of delivery) and requests a written release of lien when the job is completed.
What would be your reaction to this as a contractor?
Replies
Sounds like standard operating procedure in many circles. Not to common in small-time residential work, but I don't think it's an out-of-line request. And certainly nothing for you to worry about (that is assuming you are planning to pay your vendors).
My question is who is he writing the check to when the materials are delivered, You or the supplier?
If he is writing it directly to the supplier is he trying to cut you out of your mark up?
Lien release before final payment isn't uncommon, no down payment isn't either. (May not be the best business practice , but it is done )
If I were in charge of the materials the check would be made out to me. but if i had plenty of work I'd prob just move on.
we have alot of problem with people taking down deposit and never doing the work, how do you handle that?
"we have alot of problem with people taking down deposit and never doing the work, how do you handle that?"obviously, you don't contract with those people.
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
I guess I mostly work for people with whom my reputation has preceded me. So I don't have much trouble.
A few years ago on another forum some some was complaining about Liens in California and how that they where stacked against the HO.Turns out that he had his roof replace.He made a check out for the shingles jointly to the roofer and the supply company. I have no idea why he did that.But it turns out that the roofer was behind in his payments to the supply company. So they credited this payment to the oldest charge. Then issued a lien on the HO's house.It was lifted several months later when the roofer had enough payments so that the last one was credited to this HO's job.I don't know California's lien laws, but I am sure that he could have gotten the supplier into big trouble.But he just wanted to avoid that problem and was going to use HD to remodel his bathroom..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
No down payment, no job! Period. The down payment doesn't just pay for the materials being delivered. It also pays for the permitting, the planning, securing the subs, preliminary work etc.
Thats why you use a contract and its legally binding. Protects both parties.
You can't special order things from most retailers without paying (furniture, cars, etc) so why should it be that way in construction.
"You can't special order things from most retailers without paying (furniture, cars, etc) so why should it be that way in construction."are you saying construction is like buying cars furniture etc?
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
If it's a small, one day job, I'd have no problem with no deposit, customer buys materials and pays at the end of the day. Anything else requires a deposit for me to put you on the calander. I'm not showing up for a job, only to find you got someone else and forgot to call.
If the customer writes the check to the supplier then are you off the hook for warrantee service, correct?
and if he's writing the checks to any subcontractors involved that would mean they are not covered by your insurance, and they dont need to abide by your quality standards?
then you can kiss your mark-up good bye, and any discount your supplier might give for early payment
what about all the preliminary planning. did you do that for nothing? no thats part of the job. somewhere in the planning process you need to decide if the project is worth moving forward and if so you will need to get a check to cover your time already spent.
personally, I dont like it. when I start a job I need to be in complete control of the project. you could find yourself in a precarious situation where the customer is holding all progress over a barrel and you start to lose money that you could be making elsewhere
outline a payment schedule and stick to it, for everyones good - or move on
and why do I get the feeling this post was started by the "customer"
Looks like my insticts were correct
I cant blame you for being careful, there are a lot of horror stories out there.
I am afraid though, you might have released the only legitimate applicant in favor of some stooge who does'nt know how to run a business.
years ago I was in the roofing business. it is a hit and run kind an arraingement meaning you are not on any one house for more than a few days. scheduling is key.
when I got a deposit a gave a start date as close as possible. no deposit - no start date. you learn this from people cancelling last minute because they had buyers remorse. would rather go on a cruise or put in a swimming pool. what the hell, they made no commitment
that leaves me and my crew out in the cold until I can get the next job off the ground. people that have babies and little mouths to feed dont need unexpected time off in the middle of the work week
so good luck with your fly-by-night. you two should be happy together
If the customer buys the materials himself:
I am not in the business of selling materials; heck, I only charge 5% markup over my gross. No reasonable client feels it's worth his while to give up all the above in order to save that piddling 5%, so there's usually another issue involved. Could be he doesn't trust me to be honest about my markup (some guys aren't); could be he wants to rack up Air Miles or whatever by paying with his credit card; could be he wants to pay with his credit card (I don't take them, of course) 'cause he doesn't have the dough.
Could be he's just a control freak....
Dinosaur
How now, Mighty Sauron, that thou art not brought
low by this? For thine evil pales before that which
foolish men call Justice....
A little more detail to my original question:
The project is a reroofing job after a hail storm. Job duration 4 days max. I solicited eight bids. Not to screw anyone down but to weed out the storm/insurance chasers which I did. After weeding out three, I sat down to evaluate the remaining bids to make sure I had all apples. One made the cut and was the only one of all the bidders to request a deposit. BTW, he was not the low bidder. He was one of three I called in because I had some additional work I wanted the three selected contractors to look at.
We are still in a boom here in Louisiana and contractor margins are at an all time high. I found it strange that only one contractor made the request for a deposit. It frankly made me feel a little wary of his financial capabilities. Therefore the offer to pay him, the contractor, for materials when they were received at the jobsite and then a release of lien.
I used to be a remodeling contractor but have spent most of my thirty plus years in the industrial construction arena and therefore have a little more experience than the average client. Over the years, I know of several people who have either paid a deposit to a seemingly honest contractor to never have them show up or have paid a contractor only to wind up paying for the material twice after the liens were put on their houses by the suppliers. So as to not get into that situation, I made the request.
The end of the story is that he rejected the alternate offer and I chose another contractor. No hard feelings either way. It is a shame a handshake does not work any more for either party. Anyway I was just curious to opinions from those currently in the business.
deposit is mandatory around here. Customer should not expect contractor to finance. If you had checked his references, you could have found out if he was safe.
Your response is a typical homeowners response, I bet you would find out more contractors lose money to customers that don't pay, than contractors that steal the deposit.
On a reroof the contractor would not be finacning anything.Payment at the end of 4 days.And he should have enough credit at the suppliers for shingles for 4 days..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
makes no difference, if customer is not willing to deposit, I will find someone else to work for. My fealings on this is I don't want to be holding the bag for more than my labor and profit.
"On a reroof the contractor would not be finacning anything.
Payment at the end of 4 days.
And he should have enough credit at the suppliers for shingles for 4 days."
And at the end of 4 days labor and a whole lot of nailed down shingles....no check.... then what?
Edited 5/16/2008 3:58 pm ET by sledgehammer
simple you repo about 5 sg of shingles,in various parts of the house.
when i had a bodyshop i only had one guy ever give me trouble with paying,he started the whine of no money,i walked over picked up my grinder and a extension cord,went out to the car told him i'd just take the pant back and he could get it fixed when he had the money. viola! he found the money. believe it or not i then fixed probably 8 cars of his over the next 5 years. larryif a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
Can't do that! It's nailed to the house, it's the homeowners, see ya in court.
LienSmall claims court.What if he makes the advanced payment and the contractor does not showup..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Police! District attorny, and the big one JAIL!
Oh I gorgot, restitution plus all kinds of fees!
Hey Framer52
Can youget me access to the Tavern?
Curiosity has grabbed me!!
Thanks
Jeff in Pa
OH no, not you too!
You treat it like it is a disease (or I am a fungus) LOL
Might be.
To get in, you need the attention of the moderator. There was a thread, where you went to ask to be let in. I will try to find it.
just start a thread titled tavern acess or similar to the editor
Bill, this is a standoff between parties that don't trust each other. How many thousands of dollars are you willing to bet that the other party will pay off?
Would you risk being out of pocket 2 grand in materials and 4 days of work to get a job where the customer didn't trust you?
I wouldn't. But my response would be to try hard to ascertain why I wasn't being trusted and find some way to discuss that issue before pulling out. FWIW here in Ore. the CCB advises clients or consumers to never pay for a job in advance. Deposits aren't highly thought of either by the board as far as I know.
They can't get your Goat if you don't tell them where it is hidden.
Your state happens to be the worst in the united states for not paying contractors. Thats a fact .
Im not getting on one side or the other for there is merits on both sides just like mistakes.
Contractors need markup so they choose to get it through materials as much as they can , if they can generally. I dont agree with it but Im minority among contractors. Line items should be material, labor , then profit which makes it correct to a greater point than justifying 20 percent say on top of materials and labor. There is justification in marking up labor . They normally hide their markup in materials so you dont know but its too easy for you to get priceing off the bid sheet at Lowes. Any way materials are used as tools to get profit margins up which they do need . Before I get ripped , Ill also say that marking up material for needed profit markup is about as exact as building a house per sq ft and taking all the houses you get off the same priceing . Its just not accrurate. It is done by most contractors however. Deposits are also norm if the contractor has plenty of work. Its a good move by him if he can stay busy.
You probably came out better the way you did it as a homeowner . If you pay your bill all is well. If you dont that contractor lost his butt . If you had paid the guy the deposit and he was too busy to start your job you would be here asking us what to do. Your advice on the question would be not to have given this dude any money. We get folks on here all the time that paid before the job was done and are unhappy.
From your post , you didnt know the guy or you would have mentioned it . I dont pay guys up front I dont know either . I dont work with out a deposit for guys I dont know . Someone has to give , take , ot get left out . This contractor got left out but hes probably happy working somewhere else on his terms . No harm no foul. Move on with no hard feelings as you say. I think you did the smart thing because you got what you wanted. However if he had somthing he offered you couldnt get anywhere else you would have had a different choice like a copper roof by a specialist or a very expensive cut up roof. Then somtimes its worth a little gamble to rest well at night under such a roof. That would have came with references W insurance and bonding at a higher price also as a general rule . If you have enough building savy in you to inspect the job then you could save money. Its as long as it is wide in comparisons.
Id bet the guy wanting the deposit will be there when the other guys arent because hes smarter than the rest . That might mean somthing to you in the future or mebbe it wont .
Tim
"as a contractor how would you respond to this"
I see both side of this having been on both sides of the table.
As a contractor, I would be wary for several reasons:1 the customer has shown that he does not trust me. 2 a customer that has solicited 8 qoutes for a reroof would be much more likely to jump to another contractor at the last minute 3 the fact that he is more likely to jump to another contractor makes me uncomfortable giving him a firm start date because of the chance of having a hole in my schedule to fill.
Having said that, I might possibly have accepted your terms depending on my gut feeling BUT I would not schedule a firm start date or dedicate ANY time in my schedule untill the customer has something to lose if he changes his mind. So, in your case as soon as the materials are delivered I would want a check made out to me (including any mark-up that I might need) Then I would try to fit you in as soon as possible, but other prior scheduled jobs would have priority.