Tips:

• Stay alert to those contractors who demand a significant amount of money up front before the commencement of your project. Most reputable contractors have 30-day terms, with their materials suppliers and labor usually paid at the end of the construction month. There is no need for large deposits if you have a detailed contract with a specific payment plan based on completion of major construction phases.
  
  
• For major renovations, a payment contract is usually divided into approximately four stages. The very last payment should not be paid for at least eight weeks following the completion of your project. The delay helps to ensure that all suppliers and employees are paid by your contractor and won’t come looking to you for payment.
  
  
• To motivate your contractor to stay on schedule, consider attaching bonus payments on completion of various stages of construction. Also, penalties serve to motivate your contractor to ensure contract timelines are met. The amount in penalties should be equivalent to the cost of inconvenience to you. For example, if you are renting a house to live in until your new one is finished, consider the cost of rent per month. For smaller renovations (e.g., kitchen), consider a penalty equal to a percentage of your mortgage per month.
  
  
• An estimate should be as detailed as possible in order for you to effectively assess its accuracy. Even if your contractor presents you with a computerized printout, you should still challenge the numbers. All estimates should include an itemized labor chart, structural and finishing materials list, and contractor margins and markups. Most contractors are not willing to share details, but in order for you to determine if the estimate is fair, you will need to break down the numbers presented. Your local labor rates can be found on the Web, and you can ask your contractor the approximate number of hours required for each tradesperson. For structural materials costs, you can prepare the amount yourself or ask your local building supply store for a takeoff. Finally, for contractor margins and markups, refer to our book, The Wise Renovator: A Homeowner’s Guide to Managing Contractors and Home Renovations.

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