Contractor Wants 50 Up Front – Should You Pay?
Planning a home improvement project before you sell a house is exciting! But when it comes to contractor payments, things can get confusing.
Many contractors ask for a down payment – but what if they request a whopping 50% upfront?
Should you hand over the cash, or are there better options?
In this post, I’ll go over the reasons behind this request, potential risks, and give you some tips on how to protect yourself, if your contractor wants 50% up front.
Why Do Contractors Request Upfront Payments?
Generally, a contractor wants 50 up front for 3 things:
Cover Material And Labor Costs
Before starting a project, contractors usually have to put down a lot of money upfront.
They need to buy materials like wood, drywall, tiles, and fixtures, and they have to hire and pay workers for their time.
These costs can add up quickly, sometimes reaching thousands or even tens of thousands of dollars, depending on the size of the project.
Also Read: Mold And Water Damage In Distressed Houses
The upfront payment basically gives them the funds to get the ball rolling.
Ensure Homeowners Are Committed To The Project
Imagine you're the contractor, and you've already invested time and money into a job, only for the homeowner to back out at the last minute.
That's a tough hit to take.
The upfront payment shows the homeowner is serious and not just window shopping.
Protect Against Non-Payments
Unfortunately, contractors can sometimes run into tough situations where homeowners don't pay the final bill or bail on the project before it's done.
This leaves the contractor stuck with bills for materials, labor, and other costs they've already paid for.
An upfront payment helps protect the contractor from this risk.
It gives them some money back upfront, so even if the project falls through or the homeowner doesn't pay the rest later on.
It's basically a safety net for the contractor, so they don't get completely screwed over.
Also Read: Contractor failed inspection who pays
Risks Of Paying 50% Upfront
Here are the biggest risks of paying your contractor 50% up front:
Contractor Does Not Complete The Work
This is probably your biggest worry.
If the contractor bails or does a half-assed job, you'll have to hire someone else to finish the work, which could cost even more on top of the upfront payment.
This could happen if the contractor takes on too many projects, runs into money problems, or just isn't reliable.
Quality Of Work
When a contractor gets a big chunk of money upfront, there's a risk they might try to save money by cutting corners or using cheap materials.
They might rush through the job or hire workers who aren't skilled enough.
This could lead to problems later on, like structural issues or things wearing out too soon.
Difficulty Getting Refunds
Good luck trying to get your money back if the contractor bails or doesn't hold up their end.
Without a clear contract, you might not have many options to get their money back.
Even with a contract, going to court can be expensive and might not solve anything if the contractor is broke or out of business.
Tips For Protecting Yourself When Paying Upfront
Here are my best tips to follow, if your contractor wants 50% upfront:
#1 Research The Contractor
Before agreeing to any upfront payment, do your homework.
Thoroughly research the contractor's reputation, credentials, and licensing. Check online reviews, ask for references, and verify their credentials with relevant authorities.
However, double check online reviews because they can easily be faked
#2 Ask For References
Get some references from the contractor and actually call those people up.
Inquire about their experience, the quality of work, and whether the project was completed on time and within budget.
Also ask about any issues they faced.
#3 Get A Detailed Contract
Don't just take their word for it. Get everything in writing – what they're gonna do, what materials they'll use, how much you're paying and when, etc.
And read it carefully before signing on the dotted line.
#4 Pay In Installments
Instead of forking over the whole 50% at once, see if you can break it up into smaller payments as certain parts of the job get done.
Most contractors will agree to this.
That way, you're not out a huge sum if things go sideways.
#5 Secure Proper Permits
And finally, make sure they have obtained all necessary permits and approvals for the project.
This is a big deal. You don't want to get slapped with fines or have to redo everything because they were cutting corners.
Also Read: Selling a house with unpermitted work
Should You Pay Your Contractor 50% Upfront?
It really depends on how well you know and trust this contractor.
If it's someone you've worked with before or who comes super highly recommended, that 50% might not seem like such a big deal.
But if you're feeling sketchy about the whole thing, you might want to negotiate a smaller upfront payment or look elsewhere.
Trust your gut on this one.
What You Can Do Instead
If you don't trust the contractor enough, you still have some other options.
Like I said, you could try negotiating a smaller upfront payment, like 10-33% instead. ⅓ before, ⅓ after halfway and the remaining ⅓ after the project is very common.
Or look into financing the project through a loan or credit card so you're not dropping a huge lump sum right away.
Another idea is breaking the job into smaller phases and just paying per phase.
When Paying A Large Upfront Payment May Be Justified
In some cases, though, that big upfront ask might actually make sense.
If the contractor has to order a lot of custom materials or do major prep work before the project can start, it's understandable they'd want that security upfront.
Or if you've got a long history with this contractor and they've always delivered, maybe it's not such a big risk this time around.
Also Read: Structural Damage In Distressed Houses
Wrapping Up
The key is being smart about it. Do your research, get everything in writing, and don't be afraid to negotiate if that upfront cost is making you sweat bullets.
At the end of the day, it's your hard-earned cash - so you gotta look out for yourself.
FAQs
Is 50% Too Much?
It depends on the project size and complexity. For smaller jobs, 30% or less upfront might be normal. If the project is very large and requires the contractor to order special materials, then 50% might be more reasonable.
Is It Normal To Pay A Contractor Half Up Front?
It's fairly normal for a contractor to request a down payment of 30-50% upfront, but there are factors to consider to determine if it's reasonable in your situation.