Junebug, Home Buyer in Hoboken, NJ

What is a fair payment schedule with a contractor?

Asked by Junebug, Hoboken, NJ Sat Sep 6, 2008

We all know everyone is different and to never pay it all upfront, but does anyone have an objective opinion on how a contractor gets paid during the job? For instance maybe 10% start up, then 40% at an agreed mid point (based on elapsed time and project completion) and the final 50% upon inspection. My budget is realistic and I'm looking at a 4-6 month schedule because of permitting and approval.

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9
When having contractors give bids I listen to there ways of how it works.
I ordered From Lowes for a neat clean price work but am shocked I paid complete for Cabinet counters now learn No one calls you till you pay the other complete there responses there a retail store
No commutation or education just lies
0 votes Thank Flag Link Mon May 5, 2014
When having contractors give bids I listen to there ways of how it works.
I ordered From Lowes for a neat clean price work but am shocked I paid complete for Cabinet counters now learn No one calls you till you pay the other complete there responses there a retail store
No commutation or education are lies
0 votes Thank Flag Link Mon May 5, 2014
Good answer Mark !
CA State law puts a maximum down payment of 2% or $1,000 (whichever is less) before work starts.

I usually bill the client every 2 weeks for work completed during that time.
That way the client can visualize what they are being billed for.
They are happy to see the work being done and are not hesitant to pay for it .
0 votes Thank Flag Link Wed Nov 11, 2009
50% up front and then the rest after completion of the job.
0 votes Thank Flag Link Mon Nov 9, 2009
Not that this is a full rehab but just had a painter come in and he was paid in full after completion of the job.

But for larger scale projects, I would suggest fronting cost of supplies first. The mid point pay half of labor and then final payment upon satisfied completion.



Sean Dawes
0 votes Thank Flag Link Wed Oct 28, 2009
Hi Junebug,

I have done a few residential projects and my experience has been 25% upon signing of contract, 25-50% during (depends on labor vs. materials of project) and balance when the job is complete. In my case the job required a CO (Certificate of Occupancy), so after city inspections. I had very trustworthy contractors, so I was comfortable with this. If you are not I would do 25%-25%-50%,

Part of what you need to take into account is whether its just labor, or labor and materials. If the contractor is covering the materials they want more because they are purchasing the materials up front. If you are providing materials, they would probably take less.
0 votes Thank Flag Link Wed Oct 28, 2009
Hello Junebug, William's answer below is excellent! Thank you, I will use this as a reference for future.
My clients have always paid their contractors at completion.. perhaps it's the people that we refer that work like this?
I recently renovated my bathroom in my condo, and I however did not leave a deposit nor did I pay for materials as they worked. I only paid the contractors in full once the job was complete.
This worked out well because at the end of the renovation, (I was to pay them the next day) I went in to paint my bathroom myself and noticed water damage from along the floor molding and collecting on the new tile floor. Since I hadn't paid them yet, they ran over to address it immediately. Once that was done, I did pay them in full. Sometimes, contractors get pulled from jobs to tackle on bigger ones, so a payment schedule works to incentivize the workers to finish up within their promised timeline.
My contractor never asked for a deposit up front, and 10% seems very reasonable. William's schedule seems fair and safe.

Best of luck!
0 votes Thank Flag Link Thu Oct 15, 2009
I recently completed a renovation on my home in Ocean County. Generally, payments are 10% upfront, and then broken down with payments after each inspection (electrical, plumbing, etc). Final payment of 25% was made upon final muncipal approval.
0 votes Thank Flag Link Sun Sep 7, 2008
Junebug: My experience with construction goes back several years and was with major commercial projects. This is what we did: We paid 10% up front. We had a schedule of what was to be completed monthly. Our architect-engineer, as a disinterested third party, evaluated progress against schedule monthly. We paid only for the progress (which the contractor broke down in terms of cost), and in the case of missed dates, only after a new schedule was developed with specific manning of the project for the next month. We also deducted the 10% already paid in the deposit and an additional 10% as a hold back. I wish we held back 15%, which would have been closer to the contractor’s gross profit. This was good as long as the contractor could handle the work. In the case of residential construction, you might find your contractor too broke to pay his crew. Hold-backs don't help in this situation. Another thing we did upon occasion was to set a "not to exceed" price that fit within our budget. We offered the contractor, if he opened his books to us, a 60% share of any savings. This gave plenty of incentive to get the job done on time and under budget and actually gave us some return as well. (Time lost is generally a cost increase.)

Lots of Luck.
0 votes Thank Flag Link Sat Sep 6, 2008
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