August 18th, 2016

We all want money! Don’t you? And it’s incredibly hard to give it up. Even for a good cause, like building or renovating your home. So you finally decide to separate yourself from some of your cash and hire a contractor to work on your dream home. But your contractor wants money too. Right away! Even before any work begins. Why is that?Start-up costs. Your contractor may not have accounts with lumber yards or material suppliers. Draining dollars from a contractor’s company to pay for materials would be a killer on their cash flow. So most contractors require a deposit, usually at the signing of the contract. This initial commitment allows the contractor to order materials, pull the building permit and get the project set up.But beware. There are some contractors that take advantage of their customers and demand deposits over the typical 10 percent. The thousands of dollars they receive without starting the project becomes a way of funding their business. You don’t want to fund their business. You want to fund your project. Right?But if you are the trusting type, you might be persuaded to fork over a 20, or even 30 percent deposit only to have your contractor not show up, or show up and do a minimal amount of work. Now you’re stuck. You’ve handed over a huge chunk of change that you didn’t want to give up in the first place, with only a signed contract to show for it.That may be ok. Perhaps your contractor really intends to finish the job. But you could still run into problems. The incentive for any contractor is compensation. With 20 or 30 percent of the project already paid for, determination to dig in and get the job done may not be your contractor’s highest priority.There are also cases when a contractor might offer special pricing just to be awarded the work. The contractor may be a smaller company or start-up that can’t afford to round up the resources for the renovation. So they may ask you for a substantial deposit to cover these costs. Don’t do it!“But it’s a deal I just can’t pass up”, you say! There is a solution. Buy your own materials and have them delivered to your home. That way if your contractor calls it quits, you’ll at least own the materials to try again.Deposits are common in the residential construction business. But anything over 10 percent is not.Your Contractor – Mike