In the most recent issue of my free weekly AsktheBuilder.com newsletter, I dealt with a polarizing subject. I have received a lot of emails recently from homeowners who had hired out work to be done in the spring, and the contractors were demanding to be paid a substantial amount of money upfront before they did the work. This made many uncomfortable, and they reached out to me for advice.
I want to devote this column to that topic and to touch on the second-biggest reason your home improvement dollars may go down the proverbial drain. Believe it or not, that situation has the same root cause as the upfront money issue: hope.
You hope the contractor is going to show up and do the work and not make off with your money. And you hope he’s going to do the job right.
Here’s the thing about hope: You hope for things you can’t control. For example, you hope the weather next week will be nice. You might hope to get rescued from a deserted island. You might hope to win the lottery.
Forget about hope when it comes to contractors! You can control your money and when a contractor gets it, and you can absolutely ensure that you’ll get top-quality work that will stand the test of time.
When I broached the payment issue in my newsletter, I knew I’d make lots of homeowners happy and many of the contractors on my list bristle. Money is a very sensitive topic.
Here’s what you need to know about paying contractors upfront for a job:
When you do this, you put yourself at an immediate disadvantage. If your contractor takes off or does poor work, you’ll never ever get all your money back (not to mention attorneys’ fees should you pursue legal action). On the other hand, contractors or suppliers can easily place a lien on your home in most states, and they’ll get paid when you sell your home as long as the lien doesn’t expire.
There are jobs where a deposit is normal and required. If your job requires the purchase of nonreturnable, custom-ordered products, the supplier often asks for a 50 percent deposit. The contractor needs to supply this, or the homeowner can pay it directly to the supplier.
But in all other cases, it’s not wise to pay upfront money. If a contractor asks you for a deposit like this, be prepared to ask these honest questions:
Mr. Contractor, do you pay your employees in advance?
Do you pay your subcontractors in advance for the work they do for you?
Do you pay your suppliers in advance, or do you have open accounts and are billed monthly?
Do you pay your truck service center in advance before they repair your truck?
Since you don’t pay anyone in advance, why are you asking me to do it?
I’ll give you a few reasons: The contractor might be using your money to pay off his last job. Your contractor may be in a cash bind for any number of reasons. Do you really want to do business with a capital-strapped individual? The contractor may not have credit at local supply houses. Why is that? I could go on and on and on with reasons.
When my newsletter is published, an announcement shows up on my Ask the Builder Facebook page. The bricklayer in Cincinnati who used to do all my jobs saw it, and this was his response: “As a contractor, I’ve always believed I will make you happy to pay me! Have never asked for a dime up front. Great advice as usual, Tim!”
This bricklayer is a pro. Professional contractors have no fear that you’ll pay them. They know they’ll satisfy you. They have plenty of cash in their business account. They don’t need your deposit to make payroll that week or to pay for the supplies they need.
One of the subscribers to my newsletter is a contractor, and he objected to my feelings about upfront money. He said he does it because homeowners back out of his contracts and hire a contractor they find later at a lower price. When I asked him how frequently this happens, he never responded. I found that silence troubling.
Need an answer? All of Tim’s past columns are archived free at www.AsktheBuilder.com. You can also watch hundreds of videos, download Quick Start Guides and more.