What is a Reasonable Down Payment for a Contractor?
Many contractors are willing to work with homeowners to establish payment schedules or negotiate down payment terms.
Dear Angie: I have a contractor set to replace my concrete. However, the contractor wants 90 percent of the agreed-to price up front before any concrete is poured, which I am reluctant to agree to. Do you recommend a schedule of payment? – Paul S., Littleton, Colo.
Dear Paul: It’s not uncommon for contractors to ask for a down payment up front to secure your spot on their schedule or purchase some of the job materials in advance.
Asking for more than half of the project cost up front, though, is a big red flag. A reputable and established contractor should have the wherewithal to purchase enough materials to get the job started without relying on your down payment.
I recommend tying payments to progress made during the job. More than half of contractors who responded to a nationwide Angie’s List poll said they require down payments. Of those, though, 75 percent said they are willing to negotiate on down payment terms. Many also said they are willing to work with homeowners to establish payment schedules as certain milestones are met on the job. For example, you could offer the contractor three equal payments; one for delivery of materials, another when the concrete is poured and a final payment once the concrete has cured and you are satisfied with its appearance and performance.
If the contractor isn’t flexible about establishing reasonable payment terms before even starting the project, it could be a warning signal that the contractor could be difficult to work with if other issues arise during the project. A rational contractor should understand that a homeowner shouldn’t have to pay for the job before it’s done, just as the contractor wouldn’t expect to wait to get any money after the job was done.
There are certainly exceptions to this rule of thumb; for example, if the project requires special materials that the contractor must order in advance. However, with what appears to be a routine concrete job, I don’t see that being the case. I propose you discuss your concerns with your contractor. If he or she can’t offer a reasonable explanation for the high down payment requirement and is not willing to adjust that requirement, I recommend finding another contractor.
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