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Paying A Contractor In Cash

Paying A Contractor In Cash

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Pay a Contractor in Cash | This is the Big Green. It's dangerous to pay a contractor in cash. Be SURE you get a signed receipt and better yet, a notarized affidavit BEFORE handing over the cash.

DEAR TIM: My contractor has offered me a 10% discount if I pay him in cash. This seems like too good of a deal to pass up. Is there a danger in doing this? P. V.

DEAR P.V.: Paying your contractor in cash can be very risky. Generally, building and remodeling projects cost hundreds and thousands of dollars. Usually, business transactions dealing in sums such as these are not done with cash.

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What's a Good Way to Pay in Cash?

If you decide to pay your contractor in cash so as not to pass up the deal, you must do several things. I recommend that the payment transaction occurs at your bank at a prearranged time. You should not get the money and take it to your home or to the contractor's office. This is very dangerous.

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Should I Get a Signed Receipt?

The contractor must produce a receipt for the amount you are giving him. Make him sign the receipt in your presence and mark the receipt 'PAID'. Have his signature notarized.

Is a Notarized Affidavit the Best Receipt?

A notarized affidavit is the best legal receipt. This is your protection against a valid mechanic's lien being filed against you and your property. The contractor is swearing under oath that as the date on the affidavit he's been PAID IN FULL for all work. This means that he can't file a valid lien for the days BEFORE the signing of the affidavit. The date on the affidavit should be the same day as you hand over the cash.

Obtain a signed, notarized affidavit from the contractor at the same time. This affidavit should clearly state that all workers and material suppliers have been paid. If they have been paid, they will gladly supply a similar affidavit stating that they have, in fact, been paid. Demand these documents.

Should I get Materialmens' Certificates Too?

Yes, if your state has this document, get those as well. This certificate signed by the material suppliers states that they've also been paid in full for the material they delivered to your home. Not all states require this, so call the supply house accounts receivable employees and ASK THEM. Don't trust what the contractor says. A supply house can also file a valid lien on your property if they've delivered material and NOT BEEN PAID.

After you have received all of these documents and you are satisfied with their accuracy, you can then hand over the cash to the contractor. Remember, do this at your bank in the presence of a bank officer. This person will witness that you, in fact, paid the contractor. This same person is often a notary public and will notarize all of the necessary signatures. Dealing in cash can be dangerous, simply because it cannot be traced. You must have a receipt!

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