Should You Pay Your Contractor a Down Payment

More and more contractors are requiring a down payment before starting work. The required amount can be anywhere from 10 to as much as 50 percentage of the total cost.

Is this down payment justified and should you give it to your contractor?

First off we aren’t talking about small jobs here. If for example you wanted a pond built in your garden and the landscape company asked for a couple of hundred bucks to cover the cost of the lining and pump with the labor costs to be paid on completion then its a reasonable request.

What I am talking about is the the new house build, home extension or double garage type jobs.

When hiring a contractor for these types of construction job then they should be companies who have been around long enough and be solvent enough to have good credit standing with the suppliers.

If they are then they can comfortably get the supplies needed to get them to first payment stage without requiring a down payment. If they aren’t then you really shouldn’t be employing them for a decent sized job.

Of course the contractor will say that a customer happy to pay the requested down payment is showing commitment to the project as well as good faith. After all, they want some sign that payment is going to be forthcoming.

My argument (and yours) should be that you are showing commitment by agreeing to the stage payments.

When you are paying for a construction job via a bank loan it is worth noting that no loan officer will sanction a down payment and if a bank won’t do it then neither should you.

The reason for a banks refusal is simple – You will have nothing to show for the money where as when you make the first agreed stage payment the work will be done to a level and standard as agreed in your building contract.

Down payments should really be avoided at all costs. If you absolutely must have this particular contractor that insists then one way to cover yourself is to go with him to the suppliers and pay for the first load your self.

At least this way if he walks off the job, goes bust etc. then you are the rightful owner of materials on site.

This method also works well for smaller jobs. In the earlier example of the garden pond, asking the landscaper for a shopping list and going yourself is the perfect compromise. He can simply deduct what you have spent from the final bill.

Source by Adrian Kinley

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