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Do contractors usually ask how you're going to pay for the work?

Answered by Jeffrey Anderson ~ April 21, 2014 ~ No Comments

Is it normal for a contractor to ask the homeowner how the project is going to be funded?

-Sam

Jeffrey Anderson

Sam, it's going to vary by contractor, but when a home improvement project gets up toward $10,000 or more, almost all contractors are going to want some assurance they'll be paid upon completion. One of the ways they protect themselves is by asking for a signature on their contract. After reviewing it thoroughly, you may want to have an attorney look at it before signing your name on the dotted line. That is especially true if the contract is for a big remodeling job that has a substantial price tag. Once you're comfortable with the contract terms, signing the contract can be beneficial to you as well as offer protection if something is done incorrectly or not at all.

When a home improvement project gets up into higher price brackets, not only will contractors want a signed contract, they usually want to know that the funds are there to pay for the job. In many cases remodeling projects that are costly are also lengthy so a draw schedule is agreed upon before work starts. A draw schedule serves two primary purposes: it provides cash flow for the contractor as the job progresses and also gives them peace of mind knowing that they won't be waiting for all their payment at completion. Draw schedules are normally set up based on phases of construction being finished.

If there is a lender involved, the contractor may be asked to provide lien waivers from sub-contractors and vendors prior to payment draws being released. This gives the lender and customer assurance that the funds are being used to pay for the labor and materials being used on the project.

Just as a contractor might wish to verify how your project is being funded, if your job is medium sized or larger, it can be a very good idea to ask a few of your own financial questions. Inquire as to how long the contractor has been in business and for a list of vender and sub-contractor references that can be checked. The last thing you want is for your contractor to close their doors in the middle of your project, or even worse, to find out they haven't paid for some of the labor and materials already done or installed. Don't be afraid to contact a few of the vendors and sub-contractors they've used on other projects to find out if they have a good record concerning paying their bills.

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