[NA] Determining an appropriate deposit amount

ArrowFlyer86

ArrowFlyer86

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The Little Arrow That Could
Have you ever had to negotiate a deposit before on work being done, either aviation or non-aviation? How did you go about it? Any systematic methods for doing it?

For context I'm getting a bit of housework done and I had a contractor quote me 8k for the work, only $1500 of which is materials, and then ask for a deposit of $4k. That seemed really excessive prepaying $2.5k for labor that won't begin for weeks.

To me a deposit is all about risk management. On the biz side, you don't want to get stuck with a heap of materials that go unused or have a big gap in your schedule if they cancel - but on the flip side the buyer doesn't want to throw down half the payment for a job for work the contractor no longer feels incentivized to complete.

Any horror stories are welcome and might make me feel better about pushing back pretty strongly on it :D

Edit: in this case I counter proposed to pay in advance for all the materials up front. Then said I'd pay him once work was underway, either per task as it's completed (per the invoice value of each task), or in total once completed. His choice.
 
$4K would be but much for me.. Sounds like he getting from you to pay me.

Your last sentence is the best way to go..
 
ArrowFlyer86 said:
Edit: in this case I counter proposed to pay in advance for all the materials up front.
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I'd do that for materials..
But I'd want some kind of assurance that the delivery would be made directly to my site...not his.

For labor...
I like the idea of 'paying for goals accomplished' ie you both agree in advance what tasks are what % of work done - ie concrete completed, 25% payment; framed and roofed with wiring, another 25%, dried in and plumbed 25%, final items 25%.
(PS I know a POA contract attorney specializing in the construction trade who would thrown down on my suggestion poste-haste but there you have my opinion lol)

Doesn't sound like your project is worthy of the expense/trouble of escrow?
 
A contractor should not be paid in advance for labor, imo.

If he is so desperate for a paycheck he needs money up front to cover personal expenses then they're probably not good at their job.

Frankly, I would only pay 50% of materials until I saw them on site.

In the end, a contractor/owner relationship becomes a matter of fairness and trust. If both parties act responsibly projects go well.

Have your expectations in written form, including a statement that "time is of the essence" and a reasonable period that they agree to complete the work. Contracts, while necessary, are a last resort for a resolution. If you end up having to go to court you both will lose, but having a written contract will help you lose less.
 
For new customers we usually have them pay for materials up front.

For customers that tore the boom off their excavator....I've got their excavator.
 
Let'sgoflying! said:
I'd do that for materials..
But I'd want some kind of assurance that the delivery would be made directly to my site...not his.

For labor...
I like the idea of 'paying for goals accomplished' ie you both agree in advance what tasks are what % of work done - ie concrete completed, 25% payment; framed and roofed with wiring, another 25%, dried in and plumbed 25%, final items 25%.
(PS I know a POA contract attorney specializing in the construction trade who would thrown down on my suggestion poste-haste but there you have my opinion lol)

Doesn't sound like your project is worthy of the expense/trouble of escrow?
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I didn't put the stipulation in about delivery location for materials.

In this case my counter offered $1500 is a low enough dollar value that I'm willing to risk it. $4000 is a different story. Then I'd want to see materials.

And yeah, I felt like the job price is low enough where it wouldn't warrant a formal arrangement like escrow.

Lndwarrior said:
A contractor should not be paid in advance for labor, imo.

If he is so desperate for a paycheck he needs money up front to cover personal expenses then they're probably not good at their job.

Frankly, I would only pay 50% of materials until I saw them on site.

In the end, a contractor/owner relationship becomes a matter of fairness and trust. If both parties act responsibly projects go well.

Have your expectations in written form, including a statement that "time is of the essence" and a reasonable period that they agree to complete the work. Contracts, while necessary, are a last resort for a resolution. If you end up having to go to court you both will lose, but having a written contract will help you lose less.
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This lines up with my thoughts. If he comes back and is really insistent upon the inflated deposit amount, I'll have to wonder why. I'm willing to sign a contract for the deal and can demonstrate my ability to deliver on my end of the bargain by settling up after each task if needed. His risk is very little in this arrangement versus me having substantial risk in his proposed arrangement.
 
Non starter. I’ll pay for materials, either after delivery or I’ll go with and pay for ‘em. You can get paid for labor as you go (% completion).
 
I'm not paying % of completion unless there are well defined phases of value. My last project as an example was pavers and I'm not paying for them to rip up my driveway and leave me with a yard full of mud and piles of pavers for months on end. You'll get paid when I can use my driveway again.
 
Salty said:
I'm not paying % of completion unless there are well defined phases of value. My last project as an example was pavers and I'm not paying for them to rip up my driveway and leave me with a yard full of mud and piles of pavers for months on end. You'll get paid when I can use my driveway again.
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Yeah, there's an implied "minimum deliverable" before you start paying for labor. At least that's the way I'd work it. You can't do the demolition portion and leave me with a pile of rubble and then ask for compensation :)
In this case the guy is working on my deck. The tasks are broken down and quoted as 5 tasks on the invoice, each with its own quoted materials/labor dollar breakout. I figured I'd pay him as he completes each one of those.
 
Heard back today - the contractor said money for materials was fair and the rest can be paid on completion. So that's a win.
Thanks for the input, though. I was afraid I might have been taking a stance that was counter to the way things normally operate.
 
In my state, a contractor is required to put the money paid into an escrow account for the benefit of YOUR job ONLY. If he uses that money for anything else its a felony. Hard to enforce. Also if he doesn't pay his subs first, its also a felony. He can however take proceeds as work gets done. If he takes your money and does nothing its theft, if he makes an attempt at the work its called "partial work" no longer theft and just poor business. I usually buy the materials myself, that way I can judge quality of materials and I know who got paid for what and where it was delivered. Had a roofer a few years ago show up with ice and rain from a 5 finger discount. I followed up on another job he was doing and found the same materials there. If he wants to supply the materials, that is fine, i want to know where the materials are coming from. Then I can talk to the supplier, make sure of the quantity, quality, and delivery. I often get a better discount than the contractor, because I'm not behind on my bills and I offer cash on the spot to the supplier. I.E. the supplier knows he doesn't need to wait for his money. Even the best contractors are often not the best money managers.
 
Oldmanb777 said:
In my state, a contractor is required to put the money paid into an escrow account for the benefit of YOUR job ONLY. If he uses that money for anything else its a felony. Hard to enforce. Also if he doesn't pay his subs first, its also a felony.
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I wonder if this law states 'above a certain dollar value'?
Ie, large jobs and not just adding a shed, or putting in new floors. So a handyman job would not need to use escrow.
You are in Colorado?
 
Let'sgoflying! said:
I wonder if this law states 'above a certain dollar value'?
Ie, large jobs and not just adding a shed, or putting in new floors. So a handyman job would not need to use escrow.
You are in Colorado?
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No dollar amount that I'm aware of. Yes Kolorado.
 
Unfortunately I’m pretty experienced in this in the non-aviation world, so I’m guessing you are talking contractors for work at your house.

Typically a project <20k would be payable as half up front and half upon completion. For projects >20k, they would be in thirds.

I’ve had contractors take the money and never do the job, take “materials money” and never do the job, swap out premium materials for the discount ones (such as paint), start the job and never finish the work, etc. Even if something is illegal when it comes to contractors, it is often not looked into, even one guy was doing this method with several homeowners, take a deposit and do 2% of the work and never finish the rest. Even if pursued, he can come up with some excuse to avoid criminal liability and he has nothing worth taking if you went the civil route.

I have some contractors whom I’ve know for awhile and they usually do the work and send the bill after, they know me so there isn’t an issue with payment or trust there. The only issue there is people are usually quite selective on the work they do, so you need to know quite a few different people to be able to get work done.

But it’s a pain to start and go through the process, you just never know is the only thing that we do know. I think the best way is to pay for the materials yourself with your credit card delivered to your location, ideally a card that offers theft protection, and then pay for labor and the rest after. Not only is it hard to find contractors who will do the work, ones who will do a half way decent job is difficult and finish the work on a somewhat decent schedule (not this start today then you don’t see them for 2 months), and then on top of that their payment schedule. One of the things I dislike the most is working with contractors.
 
I know a few really good contractors and subs. It irritates them as much as it does you. There are also customers that are just as bad.
 
mandm said:
Unfortunately I’m pretty experienced in this in the non-aviation world, so I’m guessing you are talking contractors for work at your house.

Typically a project <20k would be payable as half up front and half upon completion. For projects >20k, they would be in thirds.
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Yeah, it's for my house. I'm glad this guy accepted far less than 50%.

Since launching this thread I've talked to a number of friends and family and they echoed what's been advised here. Also got treated to a couple stories about projects that went sideways, which made me feel better about paying as work is completed.
 
Welp, the work has been underway for a week now and it turns out there's no way my deposit amount is enough to cover the amount of timber they've bought, many of it being big, custom cuts.
frankly they've had to replace so much wood on my deck that I'm wondering if there'll be any original boards left lol.
Thank god the deck was able to be repaired though, between the deck and balcony, the 2 quotes I got for a rebuild was well over the price of an arrow engine overhaul. Counting myself lucky that I didn't wait another couple years to get this work done.
 
ArrowFlyer86 said:
Have you ever had to negotiate a deposit before on work being done, either aviation or non-aviation? How did you go about it? Any systematic methods for doing it?

For context I'm getting a bit of housework done and I had a contractor quote me 8k for the work, only $1500 of which is materials, and then ask for a deposit of $4k. That seemed really excessive prepaying $2.5k for labor that won't begin for weeks.

To me a deposit is all about risk management. On the biz side, you don't want to get stuck with a heap of materials that go unused or have a big gap in your schedule if they cancel - but on the flip side the buyer doesn't want to throw down half the payment for a job for work the contractor no longer feels incentivized to complete.

Any horror stories are welcome and might make me feel better about pushing back pretty strongly on it :D

Edit: in this case I counter proposed to pay in advance for all the materials up front. Then said I'd pay him once work was underway, either per task as it's completed (per the invoice value of each task), or in total once completed. His choice.
Click to expand...
I only ask for parts deposit
 
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