[NA] Determining an appropriate deposit amount

[ArrowFlyer86]

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

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.

 

[Ventucky Red]

$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..

 

[Let'sgoflying!]

Edit: in this case I counter proposed to pay in advance for all the materials up front.

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?

 

[Lndwarrior]

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.

 

[Racerx]

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.

 

[ArrowFlyer86]

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?

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.

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.

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.

 

[455 Bravo Uniform]

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).

 

[Salty]

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.

 

[ArrowFlyer86]

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.

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.