Depending on the nature of your home project you may need to determine a payment schedule with your contractor.

A payment schedule is a written document that states when you will make payments to the contractor at certain stages of your project. Payment schedules are common for large jobs in order to allow the contractor to purchase materials and pay workers during the course of the work. A payment schedule can also simply state that payment will be made in full at the completion of a small job.

Don’t let a contractor talk you out of needing a written payment schedule. A payment schedule ensures everyone is on the same page as well as protects you from paying for work that has not been performed. It also serves as motivation for the contractor to complete their work in a timely fashion.

Here are a few tips on developing payment schedules:

• Always get payment schedules in writing. The dollar amount and timing of payments needs to be clearly written.

• Be wary of contractors that ask for a large upfront payment. They may have financial problems or be worried that after you see their work you will not be happy.

• If you are hiring a contractor for a long, expensive job you may want to get some proof that they are in good financial standing. An example of this is a reference letter from their bank. This helps ensure that the company is able to pay their bills and their subcontractors during the course of your job. This is an important step in avoiding a nightmare contractor situation!

• For large projects a typical payment schedule is as follows: 10% at contract signing; 3 payments of 25% spaced evenly over the project’s duration; the final 15% when the job is TOTALLY completed.

• When deciding on payment timing you can specify a date, but more importantly make sure that work milestones are specified too. In other words, something like: “25% of total on July 23 if rough plumbing is completed, electrical is installed, and flooring is completed”. This ensures you are paying for work to be done in a timely matter. Do not pay on the date unless the work is completed.

• STICK TO YOUR PAYMENT PLAN. Over the course of a long project you will get to know a lot about your contractor. You may even become friends. However, don’t ever let them talk you into an early payment. Do not pay them on a specified date if their work is not following your payment plan. This is a BIG MISTAKE that trusting homeowners often make. You NEVER want to get into a situation where you have paid for more work than has been accomplished. If you do, you may find yourself waiting for the contractor to finish work…but they have no motivation to finish because they have already been paid! This can lead to a nightmare of a situation.

• Give the final payment when your final checklist is TOTALLY completed. The small details may never get completed if the contractor has been paid in full…they have moved on to the next job.

• Never pay the contractor unless the work is satisfactory. We have had many homeowners write us with questions on what to do about poor contractor work. You would be surprised how many of them have already been pressured into paying the contractor for the work they are unsatisfied with. Once you have paid the contractor it is hard to get the situation corrected. Payment signifies that the job is completed…if it is not done to your satisfaction then it is not complete!

• Always pay contractors with check or credit card. This documents your payment. Ask for a receipt.

Following the above suggestions can help you not get burned when paying your contractor.