“I Just Want to Start Building”
You’ve got quotes, checked contractor references, and done all of your homework. Now it is time to move forward to solidify a deal with a contractor to get your project off the ground. Negotiating a fair and secure deal with a contractor can set your project up for success from the beginning. You have worked long and hard to save your money for this project. Before you jump in full speed, it is important to protect your investment and establish a fair deal. So how do you negotiate a fair deal with a contractor?
You want to make sure you are getting top value for your money from your contractor. On the other side of the fence, you can imagine that your contractor also wants to make sure they get paid a fair price for the work. The goal is to find common ground that satisfies both parties.
Timing is Everything
A fair deal begins with payment terms that provide financial securities for both sides. Ideally you have a predetermined payment timeline in place. An example of a payment structure for a basement renovation is below:
1st payment (10% contract value) – Due as a deposit before project begins. Your contractor will use this to order materials, obtain permits and set up the project in their books.
2nd payment (25% contract value) – The 2nd, 3rdand 4thpayments are due at pre-determined milestones. In this case, payment will be due once framing is complete. This is something you can visually inspect and be confident your money is being well spent on work completed.
3rd payment (25% contract value) – Payment for this portion of the basement renovation will be due once drywall and flooring has been installed. Again, you can easily inspect and verify this milestone has been achieved.
4th payment (25 % contact value) – Payment here will be due once millwork and fixtures are complete. A quick walk through and you can verify this is done.
5th and final payment (15% contract value) – We recommend that you negotiate a deal that retains between 10-25% of the contract value until the project is complete to your standards. In this example, our basement is completely finished. Any touch up work is complete and you can’t wait to start moving in!
Note: This payment structure can be scaled to any size of project.
The Finish Line
You have negotiated a fair deal, your contractor has completed the project, you are happy and you release final payment……BUT it doesn’t always happen that way. There are too many nightmare stories out there. Don’t let your guard down. One of the greatest risks for you as a homeowner is over paying for work that has not yet been completed. If something happens to your contractor, there is little hope of getting your money back.
Negotiating a fair deal with your contractor is the key to success. The contractor should be able to prove the value of materials purchased and work completed at each milestone. This way you can be sure your money has been spent on work that is actually completed.
Find a deal that is fair for both parties. If you can’t come to an agreement, don’t be afraid to walk away!
Stay tuned for more posts on safe contracting. Post your project and get free quotes today!