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Tips on Paying Contractors

Tips on Paying Contractors

1. Demand itemized bids from your contractors. Ask who will work on your job. Will the individuals be employees or subcontractors? Obtain a list of all subcontractors and suppliers who intend to work on or deliver materials to your property. The effort will be worth it.

2. Negotiate with your contractor one of two things: #1- Obtain signed, notarized affidavits from each sub and the contractor himself at each payment period. Get materialman's certificates at the same time. The totals of the affidavits and materialman's certificates should EQUAL the amount of your payment!!! If not, you have a problem. #2- Negotiate the right to pay each individual yourself. If you do this, you must also receive the same affidavits and materialman's certificates.

3. Resist paying for goods and services not rendered. Often contractors ask for money up front. This is an extremely dangerous thing for you to do. Deposits should only be forwarded for special order non-returnable items that a contractor may have to purchase for your job, or where state law requires it. If possible, only pay the minimum amount required by state law. Monies for anything else are a sign that the contractor is either financially weak, or possibly doesn't trust you. Trust in a building relationship is a two-way street. You are entrusting your most prized possession to the contractor. You are trusting him or her that they will not harm your property. You are trusting that they will start and finish the job in a timely fashion. Etc., etc., etc. Surely they should trust you!!!!

4. Demand itemized bills from the contractor at each payment period. Compare these bills with the amount of work performed and the itemized bid you received at the beginning of the job. If there is a discrepancy, investigate what is wrong. Do not pay the bill unless you feel it is correct. If you pay too much money as the job progresses, quite possibly you will have, for example, $10,000 worth of work yet to complete, but only $2,000 of your money left to pay. Thousands of homeowners have found themselves in this precarious position.

5. Do not issue final payment to a contractor until you are satisfied with the work. However, do not abuse this practice. For example, if there is a tiny $100 scratch on a cabinet, it is unfair for you to withhold a $10,000 payment. Hold back $200 and release the rest. Be reasonable. Treat the contractor as you would like to be treated. Remember, if you pay a contractor before all work is complete, you will be relying on HOPE alone with respect to the uncompleted work. Never rely on hope.

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