Contractor contracts

[Nick Brubaker]

Hi everyone,

I am in the process of starting my first flip project.  I am wondering what paperwork the more experienced rehabbers here (particularly those in Georgia / Atlanta) have their contractors sign?  What do your contracts and other paperwork contain?  Are there good boiler plate documents any of you might refer me too?

Thank you. 

[J Scott]

Originally posted by @Nick Brubaker:

Thanks @Josh C..  By "draw" you mean payment installment?  What percentage would you suggest paying upfront?

 A draw is just a pre-defined agreed upon payment.  Most contracts call for several draws, and sometimes there is one prior to the work starting.

In general, I prefer to pay as little upfront as possible -- preferably nothing.  This is especially true for contractors I haven't worked with in the past.  If a contractor needs money to get started -- say, for materials or heavy equipment -- I'm happy to outlay the cash for those things (paid directly to wherever they are being purchased from), but I don't like to pay contractors for labor until after the labor has been started/completed.  

This doesn't mean the job has to be completed before I pay anything.  For example, I might agree to pay 25% of the total after 25% of the work is completed, another 25% at the half-way point, another 25% at three-quarters complete and then the last 25% at substantial completion of the work.  That's typically fair for both sides.  If a contractor has a BIG job, I might pay more than 4 draws; if it's a small job, I might pay only at completion.  It really depends on the job, but I don't like to pay ahead of work completed.

Think about it this way -- if a contractor has been paid for more work than he's completed, and then he walks off the job, who is out money?  You are.  But, if a contractor doesn't get paid for work until after work is done, if he walks away, he's out the money.  You take the money that you saved and you can pay someone else a little more to finish the job (it generally costs proportionately more to finish a half-completed job than starting from scratch).