You take delivery of the work but the trade should wait a week to get paid???
Your right, its not rocket science

If the work requires inspection, then it isn't complete. If there is a doubt, I don't pay, but other people might. Your business plan needs to cover this sort of a wait time.

My business plan excludes howmeowner GC's that dictate what my business plan should be.

I'm sure that's been a factor in your success.

Quite sure.

"Contractors can lien property to collect debts."

LBear,
Just some insight on why this may not be enough to satisfy your perspective subs.

In many cases mechanics liens can't foreclose so the contractor must wait for sale or re-fi etc. Since it is a homeowner build, they might not be planning on going anywhere anytime soon. One such H/O that owes me money intends to die in his new home and then give the place to charity.

Another homeowner G/C waited til it was freezing to order a boiler I'd bid months before. It actually raised my job cost as I was too busy and had to sub contract the install. Once the heat was on the client no longer returned my phone calls or emails.

The following spring was when I got paid, as homeowner was trying to clear the title. It turned out he hadn't paid anyone. He financed his entire remodel on the subs.

I have a demonstrable history of successful projects and delivering product to my customers. A first time GC has no demonstrable history of successful projects or paying subs. The work we do on your home will be custom and "unreturnable" much like special order or custom items that most business would require a downpay for.

If you decide to tackle a project, I would be a little bit flexible and get in touch with what is customary locally. Demands from remote posters around the country aren't likely to be met with much more than a shrug. Folks who make unusual demands of me are wished well and referred to someone else who may have time for them.

That wasn't Lbear who said that, it was my quote.

Don't think I don't have empathy for your business woes, but to be fair, there are a hundred customers who are sorry they paid in advance for every one contractor who is unable to collect using standard business practices.

If you have some reason to doubt payment, one simple expedient might be to contact the financing bank. I've never seen a banker who is unhappy to guarantee payment, providing the work is done in a timely and businesslike manner.

Yes I knew it was your quote ICF. I was simply offering flip side perspective to OP. We can go round this circle again and again, but you can't force contractors to trust HO/GC's. These are relationships that are cultivated individually.
You've enjoyed success with contractors which is fine, but the advice you offer suggests a hard line that I suspect will not work well everywhere. So we simply offer polar opposite opinions again. Nbd- just opinions.

Duplicate post

Yeah, that's fine for you, Joe, because I'm sure you have every intent to deliver a good product. The policy is meant to protect little homeowners against the OTHER contractors who may not be as diligent. And, a policy is useful because it's very difficult for us one-off builders to know anything like that in advance. And, if someone like you gets caught up in the policy, I'm sorry for the extra angst about you getting your money, but that's why I offer my banker's personal card.

Actually, of the dozen or so who wanted advance payments and who got the card, not a single one called the banker.....

"Actually, of the dozen or so who wanted advance payments and who got the card, not a single one called the banker....."

It sounds like they had already made a decision that they trusted you and wanted to work on your project. The card does little to ensure they get paid.

Look both sides assume risk and I think we agree on that. For my geo buyers even if they don't pay til I deliver, it is still a crapshoot.

I just recieved an installment for verticle loops but how does the homeowner know they are 150' and properly grouted? They don't. So I accept they have a lot to lose if I don't take care of them and I take that very seriously.

If I break up a new build in 4 increments (down/rough/excavation/final) these are relatively modest installments. Someone who suggests I would jeopardize my business, license and reputation over a modest amount of money is already more cynical than most folks I choose to work with.

Worse yet for contractors is someone can damage your reputation even if you do deliver. Homeowner GC's have great potential to complain out of ignorance. They often wish to blame the contractors for their poor planning.

I'm not suggesting you are wrong for protecting yourself, but I would caution a new homeowner GC of the tone they set when they first meet subs. Perhaps a dialogue along the lines of "I understand this is customary. I would really like to work with you but I am uncomfortable putting that much down when I just meet someone. Would you accept $XXX down and a larger incremental installment after the rough inspection?"

For heating depending on the nature of the home this might be as little as $1,000 to get me on board. That sort of tone would be so much less off-putting for me than "my way or the highway".

If we agree both sides have much to lose then accept that my comments again are simply to offer OP another perspective.

From the DIYers perspective, the problem with down payments is that there is even less incentive to show up as scheduled and finish a project for a customer the sub will neve see again. (Meeting a draw/pay deadline elsewhere is more important to cash flow than actually earning the money the sub already got from you.) I paid draws. I did not and would not prepay for materials or work.
I made my DIY status work for me. If the work was satisfactory, the sub left for with a check that day. SOP around here is net 30 days and most GCs -- anyone in business -- prefer to use other people's money as long as possible. When word got around (admittedly in a small market) subs bumped me to the top of the list because they knew the job meant fast cash.

Utter nonsense.

Why would a smart business person use his own money on your project? Cash flow is not improved by working hand-to-mouth.

I have always encouraged my customers to hire the licensed trades directly, once they had a specification from which they could bid. But requiring a down payment is an accepted industry standard and those who don't require one should be suspect for their lack of business acumen if nothing else.

No contractor will turn a profit from a deposit, he simply isn't losing money trying to be your banker. If his work in unsatisfactory you will not pay him. If it is not timely, you will not recommend him. This is all that a competent business person can hope for. If you are DIY simply to save money, then your bargain shopping is a risk you have assumed.If you know what you want and what you gotten, at the price you were willing to pay, then all is good. Unlikely, but good.

As for licensing, permits and inspections. The code inspector is there to make sure the code is followed. With HVAC this is more a safety issue since the design is left to the contractor in all but commercial industrial projects.

"When word got around (admittedly in a small market) subs bumped me to the top of the list because they knew the job meant fast cash."

Delusional.

We work of real generals and DIY generals. Once we have a deposit--just covering materials in many cases--we have to hustle to finish the job and keep the cash flowing. The hazard for any building project is the relative competence of the general and his subs. One trade can hang up a job and cost everyone else money.

The advantage of qualified general is his experience in managing construction trades and the ready source of reliable labor. The down side is there instance on the best price. There management fee, paid by the owner, is usually offset by the quality and cost of the work.

The more work the general creates for a tradesman, the more responsive the tradesman. Only a fool, or a hungry tradesman would work for day-wages. Which would you like to have working on your project? If you are hiring framers and roofers warranty and service may not be a big deal. If you want someone to design, install and service for life your new condensing boiler or ground source heat pump, plan on putting down a deposit.

Of course markets vary, but human nature...not so much.

Delusional.

Not sure what part is "delusional". Net30 is and was a standard business practice. Only in the last few years, during the Great Recession did we see terms drop down to COD and that was from need on the part of the contractors. What's funny is that I have more than a dozen invoices and proposals that have "NET30" in the box labelled "Terms" and then, somewhere in the job description they have written in something like "50% Deposit, Balance on Completion".

A number of times I had a contractor who complained about not getting an advance payment, so I was particularly careful to have the checkbook available on the day the work was to be finished. When I requested an invoice, they hadn't prepared one and three weeks later I would find myself calling them to see if they were going to ever send one out.

Toddm is entirely correct in observing that paying COD represents terms substantially better than average and could work substantially in your favor.

This thread is the funniest thing I have seen.  We have individuals who have built one or two homes, and who managed to GC it, and they are planning to tell subcontractors and GC's who have worked on dozens or hundreds of homes how the industry works.

I guess the more I see comments from homeowner GC's, I can see why it is such a pain to get subcontractors to want to work with individual GCs. 

I was planning to be the general on my own home, but the more I talked with all of the different trades, the more I realized that I didn't have the time or the experience to really do a good job.  I know that the GC is making money, but I am paying a good GC a fair price.  I wish I could do someone else's job part time with no experience better than they can do it with years of experience.  That is not realistic.  Of course, there are terrible GC's and even though they have years of experience, it means nothing.  If you want to compare to those guys, then that is a different story. 

On my house, which has just started, I already hit a small issue.  We ran into a septic tank right in the middle of the footing.  Sure, I could've dealt with the problem, but I would have to look up, who does this kind of work, do I need permits, how do I schedule it with the excavation crews, etc.  With my GC, we just took a couple days hit, and that was just due to getting into the demolition crews schedule, and also having to stop excavation because the heavy machinery needed access to the septic tank which was probably in the most inconvenient place in the back corner of the house, and we had some trees blocking some access, and then there were already piles of dirt from the previous excavation.

All I had to do was write a check, and the GC did all of the other work.

Yes, BB, my approach was pretty close to day labor. But a couple years ago, day labor looked pretty darn good and ready cash looked even better. Obviously the subs were also telling each other that I knew what I was doing.

I'm glad we are amusing eugenepan. I've built houses three ways: builder, builder as a consultant and DIY. The latter is far superior if you have the time. (I'm retired.) Some hitches need more than two days of reflection. If eugenepan hits one he'll discover that his builder is part of the problem rather than the solution, pressing him for an answer -- any answer -- that gets the project moving again. Time is money, In fact, time is more important than money.

Posted By toddm on 16 Oct 2013 08:05 PM
Yes, BB, my approach was pretty close to day labor. But a couple years ago, day labor looked pretty darn good and ready cash looked even better. Obviously the subs were also telling each other that I knew what I was doing.

I'm glad we are amusing eugenepan. I've built houses three ways: builder, builder as a consultant and DIY. The latter is far superior if you have the time. (I'm retired.) Some hitches need more than two days of reflection. If eugenepan hits one he'll discover that his builder is part of the problem rather than the solution, pressing him for an answer -- any answer -- that gets the project moving again. Time is money, In fact, time is more important than money.

I am even more confused.  Are you saying that because my GC solved a problem that arose without me having to do much is bad?  Can you explain that to me?  If time is money, and he solved it in a timely manner, why is this bad.  Please help me out.

Glad to, though you should work on reading comprehension. You had a small hitch. If you have a big hitch, your builder has a choice: doing what's good for you (fixing it right), or doing what's good for him (fixing it quickly.) Hurry up will play out in dozens of minor decisions. A man of firm opinions like Eugenep may never know how much better his house would be if he weren't rushed.

It seems to me that the DIY approach can work well for some and not well for others. Just consider the two extremes. Take the DIYer that knows little about management of projects/people or construction. I think most of us would agree that this poor guy has little chance of success without a lot of luck – and luck isn’t a good management approach. Take the DIYer that has been a GC for 20 years building homes. I think this guy would do a pretty good job of managing the construction of his own home. If fact, because it is his own home he would probably do a better job than any other home he ever constructed; that’s human nature. After all, who will care more about the construction, priorities, and attention to detail of a home than the owner?

Now, consider all the people in between these two – the people with some experience. Obviously, there is a crossover point for the amount of experience where some DIYers would do quite well and those below that point would not do so well. Just like the GC above building his own house, I know that no one else on the planet will care about the quality of work on my house like I will. (I’m not saying there are not subs out there that don’t take pride in their work, but rather they won’t care about it as much as I will for my house.)

People have different reasons for wanting to take the DIY approach; it’s not ALL about money. Take the person with severe allergies who wants to make sure there is no buried debris inside any of the walls. Who will have a better chance to make sure the stud bays are cleaned out before the drywall goes up, the retired DIYer who is on site every day, or the GC who is managing three other builds? Who will do a better job of eliminating potential electrical noise problems in an automated home, the licensed electrician, or the DIYer that happens to be an electrical engineer that understands how cables with tight bends or not properly grounding shields increases noise? Who will take more time to look for bargains, the GC who wants to finish the job as quickly as he can to get on to the next project, or the DYIer building his house with cash and time to shop around and request multiple bids?

With that said, my feeling is that for the vast majority of people using a GC to construct their home is the best way to go. And for a minority of people with the right experience and time to devote to the entire process, the DIYer approach is the way to go. That’s my two cents.

"With that said, my feeling is that for the vast majority of people using a GC to construct their home is the best way to go. And for a minority of people with the right experience and time to devote to the entire process, the DIYer approach is the way to go."

I think that sums it up nicely

Posted By toddm on 17 Oct 2013 07:54 AM
Glad to, though you should work on reading comprehension. You had a small hitch. If you have a big hitch, your builder has a choice: doing what's good for you (fixing it right), or doing what's good for him (fixing it quickly.) Hurry up will play out in dozens of minor decisions. A man of firm opinions like Eugenep may never know how much better his house would be if he weren't rushed.

So, because you are making assumptions in your own mind how things will progress, then that is my reading comprehension issue.  Truly amazing.  In this one case, where there is a clear decision to be made, it was done in a timely manner.  There was nothing to consider.  The septic tank was sitting right in the middle of the footing.  My GC talk to the structural engineer, and he said it should be removed.  It was removed in a timely manner.

So, now because he does something quickly which should be done quickly. and I am happy that he did it quickly.  It means that future decisions by my builder will be bad.  Great logic on your part.  I understand what you are saying now.  Jump from one thing to another without any logically progression and then criticize others because they can't follow an irrational man's thoughts.