Custom Home Draws and Billing

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brandon2177k

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How do you guys handle a custom home as far as downpayment and progress payments, and extras? We are new to the business side of this. Currently, we give and estimate, priced per opening, and divide it by three. The first 1/3 is downpayment for job to start. At the completion of rough in, a second 1/3 is paid. And, upon completion, the final 1/3 including extras is paid. Works ok untill things change or openings increase alot at the rough in stage. Just trying to avoid the end of the job when we know there will be additions to openings, etc. and the final payment will be alot higher than the expected 1/3 and we don't get paid cause the HO didn't realize that the final cost was going over the estimate. SO, how do you all handle such scenerios?
 
brandon2177k said:
How do you guys handle a custom home as far as downpayment and progress payments, and extras? We are new to the business side of this. Currently, we give and estimate, priced per opening, and divide it by three. The first 1/3 is downpayment for job to start. At the completion of rough in, a second 1/3 is paid. And, upon completion, the final 1/3 including extras is paid. Works ok untill things change or openings increase alot at the rough in stage. Just trying to avoid the end of the job when we know there will be additions to openings, etc. and the final payment will be alot higher than the expected 1/3 and we don't get paid cause the HO didn't realize that the final cost was going over the estimate. SO, how do you all handle such scenerios?
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Make sure you break up your payment schedule so you are not behind with any costs and profit during the project.
Don't leave all the profit for the end, in case the job goes bad or you end up not finishing it.
 
I would think that your state laws are the primary concern. In Ca you are not allowed to let payments get ahead of work. Also All changes need to be in writing prior to do that work!
If the customer makes change and then on a daily basis , they need to be aware that they will need to sign for them. I know that most customers will not like to get daily change orders but I have not heard what the alternative is. It is my understanding that it is a NO No to perform the change without a signature even if you decline to get paid.
 
Here in Arizona if a job takes longer than 30 days a contractor is allowed to obtain progress draws no matter if it is in the contract or not. The last drawn out job I did (2 months) billing was every week paymeny due in 15 days.

Also, anything special order or non-returnable has to be paid up front.
 
I have seen many times where the customer doesn't get billed for extras until the final, even if they signed change orders they still may not be aware of total, a little here and a little there can add up fast. So I like to bill changes as I go. I have no problem with getting paid often.
 
ptonsparky said:
I never did a house that I could not carry until roughin was complete, then I took 75%, with balance on completion. That said, I have never done a large (above 4000 sq feet) home.
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Having the capital and/or credit to do that is one thing, but I can't believe that you'd do an entire rough-in without getting some sort of financial commitment from the customer. Unless you're just talking about working with a GC you're familiar with.
 
any conduit work gets billed first average home only takes a week to rough so change orders get billed at end of rough I ask for 80% after rough some generals will only let me bill at 70% which is
fine also.
 
jaylectricity said:
Having the capital and/or credit to do that is one thing, but I can't believe that you'd do an entire rough-in without getting some sort of financial commitment from the customer. Unless you're just talking about working with a GC you're familiar with.
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Being broke ensured that I would have the roughin done. Quickly. I had contracts signed before I started and I did manage to survive the experience. Just how I did it and still do for the very few we work on.

Only burned once, GC was local but homeowner was from the East Coast and he refused to pay the GC. Don't know who finished the job. Take it as an example and don't do work for anyone from the East Coast. I don't.
 
jaylectricity said:
I guess I'm screwed. :roll::)
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We have some real dummies here on the East Coast, they make statements like, ( if your in business you should be able to use your supplier credit, and your cash to float their project). And there are some subs who fall for that pitch and the GC laughs all the way to the bank.
Let the GC know you need a third party draw from the project lender, and get it in writing from a credit worthy GC, there are plenty of good GC's out there that pay draws on time, and don't play games.
 
brandon2177k said:
How do you guys handle a custom home as far as downpayment and progress payments, and extras? We are new to the business side of this. Currently, we give and estimate, priced per opening, and divide it by three. The first 1/3 is downpayment for job to start. At the completion of rough in, a second 1/3 is paid. And, upon completion, the final 1/3 including extras is paid. Works ok untill things change or openings increase alot at the rough in stage. Just trying to avoid the end of the job when we know there will be additions to openings, etc. and the final payment will be alot higher than the expected 1/3 and we don't get paid cause the HO didn't realize that the final cost was going over the estimate. SO, how do you all handle such scenerios?
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I think you need to make whatever agreement you can with the guy paying the bills, keeping in mind that many states have rules about these things that are sometimes different depending on whether you are working for the HO directly or for a GC.

As for letting anyone get a huge surprise at the end of the job - I think that is an incredibly bad idea. Adders need to be billed as you go along so there is no big surprise at the end of the job.
 
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