Payment terms

momand3boysSeptember 27, 2012

What are good payment terms? My KD wants a down payment of 50% at signing, remaining 50% less $1K after cabs are in, before countertop. I think one other KD we were working with before wanted 30% down at signing.

We are close to signing, just a final quoted price and final measurements. 50% down seems like alot. We expect to be around $40K remodel for cabs incl bathrm, tile floor and bs, countertops and ceiling.

What were/are you payment terms? Tx!

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Never pay more than 50% for anything and the less you pay up front, the more leverage you have later to get the job completed. In this case, I would be more concerned about paying the remaining amount almost completely before the countertops are in unless you are doing very inexpensive tops. Break out how much of the cost is countertops and hold back at least 50% of that amount.

Once the KD has $39k out of a projected $40, there is a lot less incentive to finish the job satisfactorily.

    Bookmark   September 27, 2012 at 1:24PM
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Standard is 1/3 at signing, 1/3 at start and 1/3 after a punch list has been satisfied.

If this KD can't abide by industry standards, as her why?
If this KD is acting as a GC, it's still the same. If your GC is acting as a GC, it's still the same.

That's wayyyyyy too much money to hand over for nothing.
Given this ... um ... "exceptional" business practice, I'd have someone experienced look over your contract before you sign it. If they object? Run.

    Bookmark   September 27, 2012 at 1:37PM
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Cabinet industry standard is 50% of the cabinet cost at ordering, 40% at delivery, and 10% upon completion of the install. That is, if you are using the cabinet company's installer. IF you are not, then the full 50% at delivery is expected.

Now, if the KD is acting as the GC on the project and supervising other trades such as the electrician or counter installer, first of all, I'd have to ask if they are actually licensed to do all of that. Second, the cabinet provider would still expect to see 50% of the cabinet money in order to have your order placed, so that dollar amount wouldn't change, but you may have already paid for other services in advance of the order and may need to structure payment for the other services yet to come differently as well.

    Bookmark   September 27, 2012 at 2:33PM
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I'm pretty sure the 1/3, 1/3, 1/3 is from our state laws and regulations for home improvement contracts. CEFreeman and I are both in Maryland. The contractor is generally responsible for the cost of the cabinets. A complete kitchen job, from a kitchen place or from a big box store, with labor and materials including the cabinets would be covered.

It's certainly doable to contract with one place for labor and construction which would be covered under the home improvement code but buy the cabinets yourself. For a purchase of cabinets only with no labor, 50% down and remainder at delivery is pretty standard - but the business can ask for any terms.

    Bookmark   September 27, 2012 at 6:32PM
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Thank you for the info. I was thinking it would be more along the lines of 1/3, 1/3, 1/3 also. I have not received the contract yet, but just had a quick conversation with the kitchen guy at the kitchen store. I commented about the holdback being too little and he did say that I could hold back more if I wanted. I didn't know what to say about the other payments so I didn't say anything about that part. They are a reputable place and I could not find any negative comments about them. My neighbor used this place and I have heard of others that used them. I'm sure I will be able to negotiate terms.

They will also be removing tile from hallway and 1/2 bath, replacing with new tile and in kitchen, adding a bunch of can lights and redoing the ceiling before the cabinets actually go in. So there will be a good amount of labor also. We are getting quartz countertops. So I def will want to hold back more than 1k!

    Bookmark   September 27, 2012 at 7:35PM
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