If the projected completion date seems too distant, but the cost seems right, be careful you aren’t being two-timed. Some contractors juggle multiple jobs at once, doing two days here, three days there, to avoid turning down work. If you need your project finished by a certain date, be insistent. Make the other customers wait. Also be wary of plodders who do high quality work, but at a turtle’s pace, which, on a time-and-materials basis, can cause you severe coronary stress. One way to ensure your project finishes on time is to insert a clause in the contract providing monetary incentives for early completion and penalties for lateness, although many contractors will balk at such provisions.
For small projects, you should not have to pay anything up front unless materials have to be specially ordered. If a significant amount of materials must be procured ahead of time, you should arrange to pay the supplier directly. On larger projects, a deposit of between 10 percent and 25 percent is sometimes demanded. (If a design-and-build firm is involved, you will probably forfeit your deposit if you cancel after plans are produced.) Needless to say, if the general contractor you hire is insolvent, you may never see your deposit again. Check the firm out before cutting a check.
Contractors want to get paid as work is completed. Ask for milestones rather than weekly payments. Never let the contractor get ahead of you in be the day after he cashes your check. In addition, once you pay, you lose your leverage. Final payment is normally due upon completion, but you should demand a holdback of 10 percent to 20 percent to ensure all dangling ends are tied up. For a major addition, you may even want to stipulate that an independent home inspector will review the work prior to final payment.
Selecting a bid
Try not to make a decision based upon price alone. Rather than hunger for work, very low bids frequently result from incomplete understanding between the homeowner and the contractor. Or worse, lowballers can try to win the business and jack up the cost with “extras” later. Really high bids, in contrast, sometimes indicate the contractor has more attractive work on his plate. If one bid is more than 20 percent above or below the others, there is a good likelihood the contractor is missing something or simply not interested. Experience indicates the middle bid usually turns out best.
Contracts should contain everything you can think of, especially any verbal guarantees made by the contractor. The contract can be drawn up by your attorney, you can use a standardized form, or for small projects, simply amend the contractor’s bid. Besides estimated labor hours, contracts should incorporate a detailed breakdown of products and materials to be used. If you have a product or material preference, write it into the contract. The more detail, such as product model numbers, the better, but also include acceptable substitutes in the contract (be specific; avoid saying “Brand X or equivalent”). If you require a specific grade of material, put it down. Make sure you get credit for unused or returned materials (you may not want 24 extra feet of crown molding lying around). The contract should also stipulate that the job site will be left clean (no piles of sawdust or dirty rags) at the end of each day.
State in the contract that the final payment will not be made until you receive final waivers of mechanics’ liens from all subcontractors, verifying they have been paid in full by the general contractor and have no claim against you as the homeowner. All reputable contractors stand behind their work. Get a guarantee that covers defects in workmanship at no additional charge for at least a year after completion. You may also insert a binding arbitration clause, specifying that any disputes will be resolved by an independent arbitrator. (This option is far cheaper and easier than suing your contractor.)
Have a lawyer look over the contract before you sign it. A few hundred dollars in legal fees could save you a bunch later on. By federal law, unless the contract is signed at the contractor’s office, you can cancel within three days of signing it. So if you have second thoughts (or your lawyer does) you can still back out.
Make sure the contractor is bonded and carries workers’ compensation, property, and liability insurance. Also keep in mind Murphy’s Law and set aside an extra 10 percent of the project cost for unexpected overruns.