Paying contractor 20% after the house is sold.

[Rao V.]

Hi,

So I have a contractor who is willing to take the last 20% payment after the house is sold. 80% or so will paid weekly on milestone basis. The project will take appx 6-7 weeks max. 

The situation is that I have a house under contract and I can only arrange 80% of the bid and that's why I asked him can he wait till the house is sold. He agreed as we both know it is a hot area and house will sell in a month.

And even if house does not sell by that time I will have additional 20% as well. My question is what should be putting in contract incase things go sideways. What should I be concerned about. liens? etc.

Thanks in advance

[J Scott]

Put into the contract the specific terms of the agreement.  A few things to consider:

-  Does the 20% include overages/change orders?

-  Will he wait any amount of time necessary?  Or is there a time limit at which he gets the money even if the house hasn't sold?

-  Will he forfeit his right to lien the property after some period of time, in which case he's taking a risk if he hasn't gotten paid in that time frame?

- Does he get paid off the HUD? Or will you cut him a check? If you're cutting a check after closing, he no longer has the ability to lien the house, putting him in a bad spot.

-  Will the closing agent ask for lien waivers at closing?  Will you have one from him?

-  Will you pay interest on the amount owed?  Or is essentially an interest-free loan?