There are three reasons why a contractor might ask you for an up-front deposit:

MATERIALS PURCHASES

He needs cash to purchase the materials he’ll need to begin your project, and doesn’t have enough left from the prior project to do so.

If this is the case, try to keep your deposit to no more than 15% of the total job cost, and get a receipt when you give them a check.

You might also consider opening an account in your name at the local building supply store where they can charge the materials for your job. If you do this, do not give the contractor your account number. Ask him to go to the customer service desk and have the clerk call you so that you can approve every purchase. Insist that the contractor submit all receipts to you and then keep watch over what is actually used on the site.

COMMITTING TO DO THE WORK

But if you’ve chosen one of the premier contractors in your area, they’ll ask for a deposit as a sign that you are earnest about going forward. They have lucrative options, and they don’t want to set aside time in their schedule for you, and turn down other jobs, only to have you decide not to do the project. These are the contractors who want the largest sums, and who get them because they can. For them, it has nothing to do with buying materials.

CUSTOM ORDERS

You want some exotic, custom or very expensive products included in this project, and the factory won’t begin fabrication until they have half of the cost in hand.

No matter what the size of your project, if you are requesting a lot of custom cabinetry or pre-fabricated, long-lead items such as steel stairs, or a hand-knotted Persian carpet, your contractor will probably have a right to expect you to pay the up-front deposits to get those vendors started.

KEEPING THINGS IN BALANCE

Deposits are a matter for negotiation. It’s important to understand why the contractor wants a deposit. And if you pay him anything up front, get a receipt and deduct that payment from what you owe him in his first (or first and second) check.

MORE INFORMATION

You’ll find lots more information about the home remodeling process in Managing a Renovation: Staying in Charge and Out of Trouble, our friendly and comprehensive homeowner’s guide to remodeling project management. Download the table of contents and a sample chapter, or go to the order form to purchase it.

We offer ready-to-use construction forms, including a complete remodeling contract, in our Bookstore, as well. Have a look.

And, you may want to look at our list of More Resources for some great design ideas.

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