Is your renovation payment schedule fair?
Fairness of renovation payment schedule is asked by many homeowners. And rightly so, as we don’t want to overpay and expose ourselves to unnecessary downside.
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About a month back, there was an incident reported online where a pregnant lady paid 96% of the renovation amount only to find that the contractor has only hacked the house and disappeared.
Incidents like these are deeply frustrating, and there’s definitely a need to prevent these incidents from happening again.
While there is no “fixed” standard, this is roughly the industry standard when it comes to payment schedule. Do keep your eyes open if anything veers away from this.
The downpayment is typically 10 to 20% after you have signed the contract. The firm will then proceed to do up the 3D drawings before the works commence.
The next two payments together form 70% to 85% of the total amount. They are split between the commencement of work and the middle of works. The individual payment amount can vary. Sometimes, commencement of work is 40%, sometimes its 50%.
To be clear, middle of works typically refer to after tiling works are done or before the carpentry is fabricated/installed
This is the area where regrettably if knowledge was shared, the lady would not have paid the 96%.
The last payment after all works are done is usually 5% to 10%. It actually used to be 10%. However, due to many homeowners refusing to make payments after the works are done, many firms have now made it 5% to reduce their downside.
There are two additional pointers to take note of.
Most people would prefer progressive payment, meaning they pay only when the particular works are done (eg. tiling done, pay for tiling costs). However, it is very unlikely for renovation firms to accede unless you are doing a large ticket renovation (eg. landed A&A). Your only chance might be to find those sole-proprietor contractors. We’d suggest to not count on it.
When you are doing minor or handyman renovation (eg. < $10,000), it is possible for the contractor to take up to 50% as they don’t want to risk the homeowner “flaking”.
While these numbers might vary from firm to firm, it should not veer too far away from it. If it does, you should definitely think twice about engaging that firm.
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