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A poor contractor will either low-ball the estimate because he doesn't know better or he will overbid to compensate for a previous job gone wrong. The estimate in the middle is probably the truest. Make sure they give you a list of materials involved in your project. You can do a little research at the home improvement stores and figure out the cost of the materials versus what the contractor is charging you for them. Remember, you are paying him for a completed product. All contractors will markup their materials to compensate for the time it took them to purchase and deliver them to the site. He is also paying for the materials before your job begins and he will more than likely have to pay for those materials long before he receives a draw from you. But while markups are a necessity to the contractors, you can look for those who choose to abuse the markups. Typically, a good contractor will mark up his materials from 10-25% above retail.

For lengthy projects such as room additions or remodels, the contractors will generally make out a payment schedule corresponding to the phases of their work. For example, an electrical contractor may want a small percentage (10-20%) of the entire bid before work commences if he is installing a new electrical service in your house. He must pull permits and spend time arranging with the utility company to disconnect power from you house and return to reconnect after the installations are completed. A small up front draw is not unheard of especially if the contractor's costs are immediate and the scope of work in drawn out over a longer period of time. Contractors will ask for the start up draw when the materials he purchases for the immediate work at hand is large. Another phase of construction payments would be the rough in draw. after the majority of the "guts" or insides of the installations are complete, the contractor will come to you for another draw of more substantial amount (40-50% of the estimate). They ask for the largest portion at this time because the majority of the work is installed waiting only for the finish work such as painting, fixtures, devices, lighting etc. When the finish comes, the majority of the money has been collected and the balance would be due upon completion giving the homeowner leverage to insure the work is completed.
With most small jobs or jobs that will take only a day, payment will more than likely be requested after completion.

Always demand the pulling of permits for the various trades. Ever city and state have different rules about when a permit has to be pulled and when it isn't necessary. Make sure you ask questions of your local government and be educated. Another warning flag for a below average contractor is not pulling permits. If they are not allowed to pull permits then chances are they have no business license to do business in your city or state.

And last but not least, make sure you have a signed contract. The contractor should provide you with a contract that protects him by having your signature on file obligating you to pay him for the installations. However, his contract also protects you by legally binding him to finish your agreed upon scope of work at a stated cost to you. If you make changes during the middle of the construction, make sure the contractor gives you a written change order that states the changes, why they were made and how much in addition to the original estimate it will cost you.

Remember, it is better to be safe than sorry. Better to spend the money to have it done right the first time instead of paying twice to have a poor job made right.

Learn more about this author, Rae Harp.
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