question about draw schedule for construction addition

I am wanting to have a small bedroom in my house converted to a bathroom and another room added on. I have gotten a few estimates but do not really know how to set up payment. The project is less than 20 thousand dollars and I have the money in saving and will not require a loan for the project. I still want to set up some sort of draw schedule but I do not know what is the typical way to do it for an addition. Does the contractor have to begin work and complete a certain amount before any funds are released or do I have to upfront a certain amount for materials to get started first and then advance more money as each step gets completed? If I do it where a certain amount has to be completed before any payments are made, what parts should I asked to be done before payment and moving on to the next step. I am sure a builder wont do much without getting some kind of payment. Anyone who has experience in this please let me know.

Be vary careful. My ex's niece made the mistake of paying all upfront because the new contrator had went to school with her husband. There are several ways to do this. One is you purchase all material yourself and only pay for labor. This prevents them from telling you need a certain thing the returning it later for the cash since they did not use it. The general rule if they are purchasing the materal is one third when the material is delivered. One third half way thru and the final third when you are satisfied that the work is over and everything is as it should be.

Crappieseeker, I am a general contractor, If i where you i would ask the people i got the estimates from how they expect to be pd, if any ask for money up front they are out not taking the chance, then on the remaing i would see if what they where requesting is standard and if i could live with it with a 20,000 remodel i would want to keep it clean and simple 3 draws max but i would prefer to pay for all supplys then give the contractor his fee in 2 draws if they wouldnt agree to that i would be a little concerned.

If you pay him for the materials but he doesn't pay his bill from the lumber yard , you still owe for the material that was used on your addition.

I recently did a 40k remodel.......I did not pay anything until all work was completed.

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Originally Posted by "G"

I recently did a 40k remodel.......I did not pay anything until all work was completed.

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This

Pay for material when delivered and then rest paid after job is done and he can show the material is paid for. Just check very close to his references and check with BBB or CC. I never asked for any money until the job was completely done. Only had a problem twice getting paid for a job and they was well respected Companies. EB

I do a lot of smaller projects and am upfront about my charges. I prefer the customer pay for materials when material is delivered. If I am finacing the project, I will charge more ~10%. I do not use a draw for most projects. Pay when done.

For long term projects It is based on milestones which in my area is easy as each stage of construction needs sign off by building inspector. Usually it works out to 3-5 draws depending on project. Since I do not charge my end until project is finished it usually works out to around 60% before occupancy permit, then the balance is due when occupancy permit is signed.

If I am paying for materials, the whole game changes. Small projects 4 weeks or less I can wait till the end. Larger projects where I am out of pocket, I need paid or will charge more, my vendors don't wait so I can't.

Be reasonable. Only pay for what is done or what is there. Draws are fine, just dont pay for work not done. I like the milestone approach as it defines what will be done before each payment....... Since I have to deal with permits and building inspectors through the project, it actually makes life easier although a bit frustrating.

Early this year, I lost a job because of weather and an impatient homeowner and a greedy sub. The sub went to homeowner, underbid me and started the job. They worked on the project 2 days and wanted $$$$$. Homeowner called me and told me the story. They spent 2 days with a bobcat trying to excavate the foundation/slab and truthfully only removed the loose grass from the surface. Ground was frozen at that time 14". I got the job back, elimated the sub. And started the job 5 weeks later. I told the homeowner that he made the right choice as I was trying to figure out how to bill him for the work done to that point. He asked me what work, did not sound happy.

Site Survey.
Drainage impact study and report.
Wetlands/Water Conservation Impact study and report.
Water Conservation administration release for project.
Building plans approved.
Building permit issued.

All said and done, $1400 and about 20 hours of my time. I told him that was all part of doing business and usually was covered in my bill. Since he pulled the plug, I was trying to figure out how to get paid. He was quite appologetic and offered to reimburse me. I said no, it is included as long as I am doing the job.

I did sit down with my lawyer and redo the cancellation prior to start of work section of my standard contract to make collection of the preliminary actives a simple task.

I know that not all areas have the restrictions and building codes that I deal with but many projects have a lot of intangible costs. So the question may not be as cut and dried as it appears.

you got sum good help

I ask my clients for a 50% nonrefundable deposit on anything exceeding $250.00, however few of my jobs go over a couple of grand. It mostly covers materials purchase and pick up. It's really up to your contractor because we/they aren't going to get shafted on signed contracts with an order to start then tie up our own money in materials for a job the client may back out of. Like home builders everything is written in their favor. They will determine what they want.

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Originally Posted by ccollins

Crappieseeker, I am a general contractor, If i where you i would ask the people i got the estimates from how they expect to be pd, if any ask for money up front they are out not taking the chance, then on the remaing i would see if what they where requesting is standard and if i could live with it with a 20,000 remodel i would want to keep it clean and simple 3 draws max but i would prefer to pay for all supplys then give the contractor his fee in 2 draws if they wouldnt agree to that i would be a little concerned.

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First would be a quality contractor. You do the permits. Something that small they should not have any draws on the project. NEVER pay something in advance and if they would like a check, pay only on a % of what thy have completed.
Final payment would only be paid AFTER the city inspector has signed off on the project. If they need additional items for the project, pay by their receipts and you are sure the items are on the site.

Never go with the lowest bid, there is a reaason for this, you get what you pay for..