Home Plans And Home Designs - Financial Info on Building an addition

We are planning on building a 20 by 26-foot addition to our home. We have a bid that we feel is fair by a builder who built a neighbor's home. It is cedar-sided as is our home and we can see and like his work.

We will be paying cash for the work from maturing CDs - no loan involved. If we accept his bid, what is the next financal step as to a draw schedule? We will have 2/3 of the total now. Must we have the total of the contract right away (possibly wait for another CD to mature)? And how do we arrange the draw schedule - again there will be no loan involved.

We are real novices at this.

You absolutely should NOT pay the full amount up front!

Even 1/3rd to start is high. 10-20% would be fair, with a draw schedule based on completion status.

I like a schedule that has a large percentage at the end, giving incentive to finish the job.

Draw schedules should be part of the contract and therefore are normally initially proposed by the contractor and negotiated from there. A draw schedule should roughly follow the completion percentage (i.e. 90% complete = 90% paid). Any schedule that lags the completion % favors the owner, while a schedule that leads the completion % favors the builder. Tieing draws to stop points is also a popular method of scheduling (i.e. foundation completion, framing completion, drywall start, etc.).

jimmyp,

here in california it is a 10% deposit up to $1000.00 max. A deposit means no work started and no supplies delivered. You limit how much the contractor can walk away with prior to actually starting the project. Most bank draws are in 5-8 increments with a percentage per each milestone completed. Draw one is any permits paid, architectural fees paid, engineering fees paid etc.. by the contractor are reimbursed (10%) (in Calif. that is thousands of dollars). 2nd draw is once the foundation is in, the underfloor rough completed, the first floor joists rolled and insulation in along with a passed underfloor inspection is worth 20% and paid once inspection is passed. then once walls are framed, any upper floors framed, roof framed, windows in, siding and trim on and rough electrical, plumbing and hvac through the roof in top out, and close in inspection signed off draw 3 for 20% is paid. Draw 4 is sheetrock installed/taped/topped, cabinets set and sheetrock nail inspection passed, roofing is on (prior to rock) gutters are installed and paint at exterior is done then you pay 20% more. Once all finish is done, tile, carpet etc... house is basically complete then 20% more is paid. Final 10% is retention and should be paid only when the house is 100% complete and you are completely satisfied as well as all lien releases submitted ( by draw 5 all subs are paid in full and final draw is all contractor profit and overhead normally). Once all this is done then you pay the retention. Then I always reccomend that 30 days after move in you have made a list of all the little things that were missed and have the contractor fix them. Once you have been in 6 months you send another list of any items you have found wrong. Then at 11 months you send in your final list and have them complete the fianl list prior to the 1 year warranty period as is code for many states. This may be more than you are asking but this answers the question for all sizes of projects.

I hope this helps.

Sincerely,

Brian Garrison