How much of a deposit should I give a contractor?

How much of a deposit should I give a contractor?

The deposit is a tough subject for both contractors and consumers! It is just as hard and uncomfortable to ask for a deposit as it is being asked for one. Here are a few pointers and explanations that will hopefully give you peace of mind when you are signing that first check.

1.

Legitimacy of Contractor

As you begin your search for a quality installer for your project, it is important to make sure you are getting quotes from qualified companies. There are a lot of people that know how to install products and talk to customers but it is extremely important that the job is permitted, inspected and warranted. 

Before you sign a contract or make a deposit for any project, it is important to verify that your contractor is licensed and insured. Any company/person working in construction and accepting jobs working on other people’s homes should be both licensed and insured. This protects the homeowner just as much as it does the contractor.

2.

Timing - When to Sign the Check

The deposit is generally collected once a contract is signed or within a few days of that. You should always have a signed copy of the contract in your possession before giving a deposit. It is important to have an agreement of timeline and scheduling with the contractor when giving a deposit as well. Beware that lead times for certain special order materials can be weeks or months. If you give a deposit for a window or door replacement/installment it could be 8-10 weeks before the product is delivered.

3.

Purpose of Deposit

The purpose of the deposit is to lock in the contract. Most contractors will not consider a contract legitimate without a deposit. Once a deposit is collected - the contractor will use that money to purchase materials, permits, tools, office time/materials and whatever else is needed to complete/start the job. Depending on the company's overhead and business model the deposit might also take care of the first labor draw to activate a crew.

4.

Amount of Deposit 

Deposit percentages generally range from 15%-50% based on the contractor and also the size of the project. Small jobs ($10,000 or less) typically require a larger deposit and less separated draws. This is because the work will be completed quickly and final payment is assumed to be collected quicker. Larger jobs typically require a 25%-45% deposit generally based on the materials being used. If there are any machinery rentals, the deposit will go up to cover the rentals as well. A lot of contractors will take an additional draw once material is delivered. This will cover the initial labor costs and also any job set up costs.

In Conclusion:

There is no problem with giving a contractor a deposit as long as you take into account these things. For any job or service where materials are being ordered and paid for before the installation, there is always some sort of a deposit if not a full payment required. If you have further questions, give us a call today!