Avoid giving contractors big down payments

JACKSONVILLE, Fla. – Most contractors will ask for a down payment before the job begins. Down payments for home improvement are common, but any contractor who insists on a big down payment or complete payment upfront should raise a red flag.

A nationwide Angie's List poll found:

• More than half the contractors who responded said they require down payments (starting around 20%), but most of them said they are willing to negotiate on down payment terms.
• Many contractors also said they are willing to work with homeowners to establish payment schedules based on targeted completion dates.

Here are some other scenarios that could merit a down payment:

• If the contractor has to invest in costly materials or other expenses upfront.
• If the project involves unique, challenging or custom materials.
• To secure your spot on the contractor's schedule.

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Angie's List down payment tips:

• Negotiate your down payment: Most contractors will ask for down payments starting around 20 percent, but don't be afraid to negotiate. Some states limit the amount of money a contractor can request as a down payment, so determine your state requirements.
• Beware of large down payments:It's not uncommon for contractors to ask for as much as 50 percent down. That might be OK if you're covering materials, but that's as far as you should go.
• Tie payment dates to job completion:Give yourself options in your contract to deduct or delay payment if completion dates are missed to encourage the contractor to meet your time frame. Be specific about amounts and clearly define terms.
• Hold back at least 10 percent until the job is completed to your satisfaction: Before you make your final payment, do a final walk-thru of the project and make sure everything on the punch list has been completed to your satisfaction. If the project isn't fully finished, set a completion date for that portion of the project and don't make the final payment until you're happy with the work. The last thing you want is for a two-week project to go on for two months while those "little things" remain undone.
• Get it in writing: Have all details requiring payment terms included in a written contract and make sure you read and understand the contract before signing. And never pay for a project with cash; always use a credit card so you have recourse in case something goes wrong.