Best way to protect yourself from contractor fraud/misuse of fund
I have read several posts on here recently about contractors requiring large upfront sums before construction, and the speculation has been that sometimes these funds are used to pay for ongoing projects, etc.
I realize there is some risk inherent in building a house (heard recently of folks GCing a build who paid a deposit for Anderson windows and the supplier went out of business and spent the deposit (small coastal town)), but I want to know the best way to protect ourselves.
Our builder has a very good reputation, been in business as the same entity for years and years (no switching around corporate names, etc.), etc. I suspect, though, in this economy, most builders have some sort of money issues (either lifestyle has had to come way down, etc.). I do have a personal connection to this builder - our parents know each other and have for years, I grew up with him (didn't know him though), we know lots of the same folks, ours is the first house he is building in this area after moving back from the beach, etc. I do think he has some incentive to not cause problems with this build as this is a small town and word would get out and his business would dry up.
That being said, I do want to do everything I can to be sure the funds we are paying are spent on our house, all liens are released, there is no jacking up of invoices, etc. It concerns me and I want to do what I can to protect myself.
He suggested we open a bank account with him jointly that we could electronically transfer funds to pay contractors, and we would of course only transfer the amount shown by the invoices and would require lien releases. I presume we need lien releases before transferring funds? How does that work (I wouldn't think they would release a lien before being paid).
What is the best way to do this?