CONTRACTOR DOWN PAYMENTS - HOME OWNERS BEWARE!
NO RULES IN ILLINOIS - BUT OTHER STATES RESTRICT DOWN PAYMENTS TO HOME CONTRACTORS
Homeowners: do you have horror stories about contractors you hire requiring considerable down payments before they start work? Then, once they have your money, they take their time about finishing the job. You know, the Realtors' favorite contractor quote - "I said it would be finished by Christmas - but I didn't say THIS Christmas!"
Although our last big home improvement projects - gut renovating a small condo, as well as our own house, completed on time, and on budget, others we know weren't so lucky! Clients of ours, to whom we referred previously-reliable people, complain of contractors grabbing their down payment, not completing or slow-completing contracted work, or demanding more money before they proceed further. We had such a problem many years ago, when we finished the basement in a townhouse we owned - 6 weeks turned into 5 months of dusty, noisy living, before the third set of hired sub-contractors completed the work, although they never properly cleaned up after themselves.
Our own brother-in-law, in Chicago Suburban Warrenville IL, had difficulty with the contractor for home addition not only didn't finish their work - he didn't fully pay his sub-contractors. Litigation followed. (Folks, don't forget Lien Waivers for your General Contractor and all subs when work is complete and they have been paid!)
The Illinois Attorney General's Office offers tips for homeowners hiring a contractor. Regarding down payments, it suggests the smallest possible down payment you can negotiate. Remember, from the contractor's angle, that they want as much down payment as possible before work is begun - so be prepared to play hardball in your negotiating stance. It will be harder negotiating with a contractor you have never used before, on one in demand, and easier to work with those trades people you know from a previous project, or folks that really need the work.
Experts suggest you make a small down payment to get started, with additional installments at several milestones along the way. In a $25,000 basement finishing project project, for example, perhaps $2,500 would be paid up front or when permits are approved, another $10,000 when drywall and mechanicals are installed, and the balance upon finished completion. Avoid a token final payment as an incentive to complete finish work - contractors may walk away early, and not complete finishing details, if that final payment is a small one.
Try to avoid trades people who demand 1/2 up front. The unfairness here, especially on major projects - the contractor gets paid a sizable sum, but hasn't driven a nail or laid a wire yet! Also, contractors that charge for an initial quote, or those that demand payment to pay for their building materials, should be avoided - very unprofessional activity, which usually raises a red flag for future shoddy work and lackluster follow-up.
Always, always get terms in a WRITTEN CONTRACT, with a DEFINITE COMPLETION DATE, and, if possible, FINANCIAL PENALTIES FOR TARDY COMPLETION OF WORK.
Other states have tougher maximum down payment rules than Illinois has. In California, for example, the initial down payment, regardless of the project size is either $1,000, or 10% of the completed contract price, whichever is LESS. In the states of Maryland and Georgia, the limits are merely advisory - one-third suggested maximum down payment in Maryland, 25% suggested in Georgia.
Be very careful, when you have work done around the home! Also, if you need referrals to very professional contractors we have worked with in the Chicago and Suburban Chicago area, visit our Preferred Professionals Directory, posted on our Web Center - dean-team.com.
Check out yesterday's Chicago Tribune, and an article written by reporter Mike McClintock, in the "Your Place" section, for more information.
DEAN MOSS & DEAN'S TEAM CHICAGO
