Hey everybody, Joe Reed at Home Run Solutions here. Hey, I want to talk to you a little bit today about milestone payments within a construction contract. You probably heard the horror stories before about the contractor who requires 75% down to get started, only to disappear for two months, or worse case, disappear all together.
One way to avoid that is to look through the construction contract you’re about to sign. If you notice a big chunk required at the outset, that should be a red flag. There’s really no case where you should be paying more than 25% down to get going on a project. Throughout the project, there should be small incremental milestones to be paid out, and then at the end of the project, little to none owed as well.
It’s a fair way of paying for what you get throughout the project. It allows you a little bit of leverage, and it’s fair to the contractor so that they can get payment, and make their payments towards their subs and their vendors along the way. For example, you’d have say 15% down, 15% at the end of demo, 15% at framing, 15% prior to rough in and mechanical, and so on for drywall, cabinets, etc.
It can be structured however you see fit. A lot of times you can also choose to double up on some of those payments if it’s easier, but at least you have the options so you’re not paying too much up front, and you don’t get burned. Hope that helps with your project.
If you’re looking for more resources, check out our website, homerunsolutions.net. You’ll find a downloadable e-book. It’s free and called, ‘How to Hire a Contractor Without Contracting an Ulcer‘. It’s got great tips and checklists, and it’s a great resource for any remodeling project. Hope that helps. Have a great day. Thanks!