Pre-Pay, or Not to Pre-Pay

I talk to, and advise home owners or builders just starting out.  Often times they call to ask how to get money back from a subcontractor.

I always ask, “Why do you need money BACK from the subcontractor?”


Then the tale starts of prepaying for materials or worse, prepaying for labor.  Don’t prepay money to a contractor or subcontractor for anything.  Ever. 

I’ve done it.  Prepaid for stone.  It was to show up the next day. Never arrived.  After two weeks of leaving screaming voice mails into the poor guys phone, he called back to say he was in the hospital, crashed his motorbike leaving my house.  Ok, now I feel like a jerk.

Another time prepaid the contractor for 1/2 the kitchen cabinet costs.  He arrived about a week later with new rims and tires for his truck.  I called the cabinet company, the cabinets were not ordered.  Don’t pre-pay!!!  That is it, NEVER again.

Reputable sub-contractors do not need funds upfront.  If your pushing a subcontractor into jobs larger then he normally works on it can be a stretch for them to carry costs, so be reasonable, work with them.  Offer to pay for the materials. WHEN THEY ARRIVE ON THE JOBSITE.

Sometimes you need to special order items, kitchen cabinets are a typical item.  The sub contractor, kitchen designer or contractor will ask for an advance for a deposit.  Don’t give the subcontractor the money.  Call the supplier/manufacturer directly and pay that way. Sometimes the contractor will be strongly opposed to this.  Probably because they drastically inflated the cost of the cabinets or materials to you.  Just tell them, “Sorry this didn’t work out.  I was really looking forward to having you do my kitchen.”  If they want the job they’ll work with you.  If they are flat out lying and no deposit is required, then they’ll disappear, which is a good thing.

Another great topic is how do you pick a contractor… In a few words the handshake test.  If I don’t think a person will honor a handshake deal, I don’t do business with them.  (But ALWAYS back it up with a contract!)


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