Providing deposits for contractors is a crucial—and normal—step in starting a renovation
Short answer: Yes.
But there are exceptions, and your contractor may have some flexibility. Below, Sweeten outlines the reasons behind upfront payment amounts, and some options for negotiating your deposit for a contractor.
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Why do contractors require a deposit?
Deposits for contractors are critical because they essentially allow your project to begin! Your general contractor needs to secure a crew and begin ordering materials right away. They may also need to rent equipment. And your contractor can’t take on all the financial liability for these commitments themself.
How much of a deposit can a contractor ask for?
The exact deposit amount contractors ask for upfront varies and is especially dependent on the size of the project. For relatively small jobs, like a $15,000 bathroom remodel, contractors may ask for a 50% deposit. For large jobs, like a $100,000 full-home renovation, a 10%–20% deposit is more typical.
Is the deposit for a contractor negotiable?
It might be. In many cases, contractors start with a standardized contract, so some of the terms could be based on a typical job rather than the specifics of yours. You may be able to ask for somewhat lower initial payment or deposit.
The ideal time to ask is during negotiations, before the contractor drafts the contract. But they may be amenable to a minor contract alteration after the fact. Just know that their flexibility may be limited.
What about the remaining payments?
General contractors use a number of different fee structures. The payment schedule might be based on fixed dates, or on major project milestones. For small jobs, they’ll typically ask for just two payments—one upfront, the other at the end. For larger projects, there may be as many as five scheduled payments.
Most contractors ask for the final payment upon “substantial completion.” This means that everything’s complete except the punch list*, and possibly final work on minor finishes. Occasionally, a contractor will consider a job substantially complete when there’s a single large outstanding item—like an expensive fixture that’s held up by a shipping delay, but which won’t require much labor to install.
Points to remember for contractor deposits:
- Expect to pay a deposit for a contractor before work can begin
- Expect to pay a higher percentage on a smaller job, and vice-versa
- Discuss the contractors’ deposit and payment schedule before they draft the contract
- If you’d like to amend the contract, don’t expect the contractor to have unlimited flexibility
*The punch list is a tally of any minor problems for the contractor to fix—like a paint splatter, a missing drawer pull, a misaligned cabinet hinge, etc.
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