Finding & Working with Contractors

[Nancy Allen]

I have been reading the posts about working with contractors and would like some additional information on:
- What are some key questions to ask a contractor you are considering for your project?
- What red flags do you look for in the contractor's responses?
- How do you validate a contractor's materials list to determine reasonable cost?
- How are surplus materials handled? Do you seek reimbursement from the draw request on the last payment?
- What should I expect to pay in advance? Material? Labor? Both?
- Is it standard practice to as your contractor to provide a draw request prior to material and labor payment?
- What process do you use for paying your contractor i.e. draw request on the 10th, payment on the 15th? Last payment 5d after completion?
- Do you ask your contractor for a lien release waiver prior to the last payment?

Thanks for your help, your experience is invaluable!

Mike & Nancy Allen
New Story Properties

[Aaron McGinnis]

1) Ask for trade license, insurance, references

2) Not providing any of the above, or license not in the contractor's name

3) You don't. Seek 3 bids for each job. A good, competent contractor is not going to react well to his building material prices being audited by someone who knows less about the business than he does. For finish items like faucets, lights, etc. you should get an itemized budget list. Our contract clearly spells out that we will only install products that we procure and supply.

4) The way we do it - we have a disclaimer in our contract that expressly spells out that we will sometimes over-order, and leftover materials belong to us. Our customers are billed per their original scope and contract. The issue is that sometimes in order to get the last 5sqft of tile or flooring, you have to order a whole extra box and so there's leftover. This leftover goes back to the supply house. 

5) We require deposits and regular draws. Deposit is between 10-15% of the total contract and then draws are based on city/county inspection schedules. When I pay my employees and subcontractors is exactly 0% my customer's business.

6) Yes. Otherwise the contractor is acting as a lender

7) Our invoices are due on receipt, late on day 11 (with penalties and fees), and we file a lien on day 16. In the great state of Georgia, contractors only have 30 days to file a lien after issuing an invoice.

8) We swap lien waivers for the final check.

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Edit to add (And this may spark a lively debate, which would be awesome)

The link to 123flip above with the schedule for contractor payment works pretty well on small jobs (say, $35-40k or less)

On large jobs, it's not very reasonable to expect a GC firm to carry 40% until the last nail is driven and 30% until the mid-point of a job.... unless they are charging you substantially for the carrying cost of their financing.