Contractor wants client to open checking account











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I recently heard about a construction contractor who's building a house for someone, and this contractor wants the client to open a checking account with the contractor's name on it so that the contractor can use that account to pay for building expenses. I assume the money in the account would come from the client (some kind of cost-plus contract?).



This sounds super sketchy to me. Is there any legitimate reason for doing this instead of just invoicing expenses?










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  • 19




    Giving a contractor access to the full funds for the job before it is complete is a recipe for disaster. I have heard a TON of horror stories of contractors absconding with the funds and never finishing (or starting) the job.
    – JohnFx
    yesterday






  • 2




    @JohnFx I can very well imagine the contractor having heard (or lived) a ton of horror stories of clients not paying. Combined with the popular belief that lawyers and notaries cost (instead of save) money, it's not that hard even for an honest contractor to come up with such idea.
    – Pavel
    19 hours ago








  • 5




    People have made good points about how this is problematic but the example doesn't actually say that this account should have the full amount in it so that is not necessarily a problem. Where I am it is common to pay a certain amount up front and potentially further installments as the project moves along, withholding a significant percentage (like 50%) until the end. I don't really see the advantage of letting them write their own cheques against your account versus you just writing them a cheque when the time comes to give them some money.
    – Eric Nolan
    18 hours ago










  • The issue I have heard from this method of contracting is that the contractor does not have the funds to build the house without you. Not necessarily a scam, but maybe not the ideal contractor for a house.
    – Jordan.J.D
    11 hours ago










  • Is this a real licensed contractor, or someone doing under the table stuff?
    – trognanders
    1 hour ago















up vote
20
down vote

favorite
1












I recently heard about a construction contractor who's building a house for someone, and this contractor wants the client to open a checking account with the contractor's name on it so that the contractor can use that account to pay for building expenses. I assume the money in the account would come from the client (some kind of cost-plus contract?).



This sounds super sketchy to me. Is there any legitimate reason for doing this instead of just invoicing expenses?










share|improve this question




















  • 19




    Giving a contractor access to the full funds for the job before it is complete is a recipe for disaster. I have heard a TON of horror stories of contractors absconding with the funds and never finishing (or starting) the job.
    – JohnFx
    yesterday






  • 2




    @JohnFx I can very well imagine the contractor having heard (or lived) a ton of horror stories of clients not paying. Combined with the popular belief that lawyers and notaries cost (instead of save) money, it's not that hard even for an honest contractor to come up with such idea.
    – Pavel
    19 hours ago








  • 5




    People have made good points about how this is problematic but the example doesn't actually say that this account should have the full amount in it so that is not necessarily a problem. Where I am it is common to pay a certain amount up front and potentially further installments as the project moves along, withholding a significant percentage (like 50%) until the end. I don't really see the advantage of letting them write their own cheques against your account versus you just writing them a cheque when the time comes to give them some money.
    – Eric Nolan
    18 hours ago










  • The issue I have heard from this method of contracting is that the contractor does not have the funds to build the house without you. Not necessarily a scam, but maybe not the ideal contractor for a house.
    – Jordan.J.D
    11 hours ago










  • Is this a real licensed contractor, or someone doing under the table stuff?
    – trognanders
    1 hour ago













up vote
20
down vote

favorite
1









up vote
20
down vote

favorite
1






1





I recently heard about a construction contractor who's building a house for someone, and this contractor wants the client to open a checking account with the contractor's name on it so that the contractor can use that account to pay for building expenses. I assume the money in the account would come from the client (some kind of cost-plus contract?).



This sounds super sketchy to me. Is there any legitimate reason for doing this instead of just invoicing expenses?










share|improve this question















I recently heard about a construction contractor who's building a house for someone, and this contractor wants the client to open a checking account with the contractor's name on it so that the contractor can use that account to pay for building expenses. I assume the money in the account would come from the client (some kind of cost-plus contract?).



This sounds super sketchy to me. Is there any legitimate reason for doing this instead of just invoicing expenses?







united-states scams contractor






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share|improve this question













share|improve this question




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edited yesterday









Rupert Morrish

4,0602831




4,0602831










asked yesterday









BradDaBug

31828




31828








  • 19




    Giving a contractor access to the full funds for the job before it is complete is a recipe for disaster. I have heard a TON of horror stories of contractors absconding with the funds and never finishing (or starting) the job.
    – JohnFx
    yesterday






  • 2




    @JohnFx I can very well imagine the contractor having heard (or lived) a ton of horror stories of clients not paying. Combined with the popular belief that lawyers and notaries cost (instead of save) money, it's not that hard even for an honest contractor to come up with such idea.
    – Pavel
    19 hours ago








  • 5




    People have made good points about how this is problematic but the example doesn't actually say that this account should have the full amount in it so that is not necessarily a problem. Where I am it is common to pay a certain amount up front and potentially further installments as the project moves along, withholding a significant percentage (like 50%) until the end. I don't really see the advantage of letting them write their own cheques against your account versus you just writing them a cheque when the time comes to give them some money.
    – Eric Nolan
    18 hours ago










  • The issue I have heard from this method of contracting is that the contractor does not have the funds to build the house without you. Not necessarily a scam, but maybe not the ideal contractor for a house.
    – Jordan.J.D
    11 hours ago










  • Is this a real licensed contractor, or someone doing under the table stuff?
    – trognanders
    1 hour ago














  • 19




    Giving a contractor access to the full funds for the job before it is complete is a recipe for disaster. I have heard a TON of horror stories of contractors absconding with the funds and never finishing (or starting) the job.
    – JohnFx
    yesterday






  • 2




    @JohnFx I can very well imagine the contractor having heard (or lived) a ton of horror stories of clients not paying. Combined with the popular belief that lawyers and notaries cost (instead of save) money, it's not that hard even for an honest contractor to come up with such idea.
    – Pavel
    19 hours ago








  • 5




    People have made good points about how this is problematic but the example doesn't actually say that this account should have the full amount in it so that is not necessarily a problem. Where I am it is common to pay a certain amount up front and potentially further installments as the project moves along, withholding a significant percentage (like 50%) until the end. I don't really see the advantage of letting them write their own cheques against your account versus you just writing them a cheque when the time comes to give them some money.
    – Eric Nolan
    18 hours ago










  • The issue I have heard from this method of contracting is that the contractor does not have the funds to build the house without you. Not necessarily a scam, but maybe not the ideal contractor for a house.
    – Jordan.J.D
    11 hours ago










  • Is this a real licensed contractor, or someone doing under the table stuff?
    – trognanders
    1 hour ago








19




19




Giving a contractor access to the full funds for the job before it is complete is a recipe for disaster. I have heard a TON of horror stories of contractors absconding with the funds and never finishing (or starting) the job.
– JohnFx
yesterday




Giving a contractor access to the full funds for the job before it is complete is a recipe for disaster. I have heard a TON of horror stories of contractors absconding with the funds and never finishing (or starting) the job.
– JohnFx
yesterday




2




2




@JohnFx I can very well imagine the contractor having heard (or lived) a ton of horror stories of clients not paying. Combined with the popular belief that lawyers and notaries cost (instead of save) money, it's not that hard even for an honest contractor to come up with such idea.
– Pavel
19 hours ago






@JohnFx I can very well imagine the contractor having heard (or lived) a ton of horror stories of clients not paying. Combined with the popular belief that lawyers and notaries cost (instead of save) money, it's not that hard even for an honest contractor to come up with such idea.
– Pavel
19 hours ago






5




5




People have made good points about how this is problematic but the example doesn't actually say that this account should have the full amount in it so that is not necessarily a problem. Where I am it is common to pay a certain amount up front and potentially further installments as the project moves along, withholding a significant percentage (like 50%) until the end. I don't really see the advantage of letting them write their own cheques against your account versus you just writing them a cheque when the time comes to give them some money.
– Eric Nolan
18 hours ago




People have made good points about how this is problematic but the example doesn't actually say that this account should have the full amount in it so that is not necessarily a problem. Where I am it is common to pay a certain amount up front and potentially further installments as the project moves along, withholding a significant percentage (like 50%) until the end. I don't really see the advantage of letting them write their own cheques against your account versus you just writing them a cheque when the time comes to give them some money.
– Eric Nolan
18 hours ago












The issue I have heard from this method of contracting is that the contractor does not have the funds to build the house without you. Not necessarily a scam, but maybe not the ideal contractor for a house.
– Jordan.J.D
11 hours ago




The issue I have heard from this method of contracting is that the contractor does not have the funds to build the house without you. Not necessarily a scam, but maybe not the ideal contractor for a house.
– Jordan.J.D
11 hours ago












Is this a real licensed contractor, or someone doing under the table stuff?
– trognanders
1 hour ago




Is this a real licensed contractor, or someone doing under the table stuff?
– trognanders
1 hour ago










4 Answers
4






active

oldest

votes

















up vote
37
down vote













While a traditional checking account with the contractor's name on it sounds a bit off, it's not uncommon for private contractors to leverage a construction escrow account for larger projects like building a house. This enables a situation where the contractor can get paid for their time as work progresses and doesn't have to pay for materials out of pocket and wait for reimbursement from the client.



This may be what the contractor in this instance is intending, but an escrow account would have a third party managing release of funds, which is safer than the client owning an account and giving the contractor the ability to draw from it at will, since that could lead to overdrafts and other issues.



If this is all 2nd hand information maybe there is some communication breakdown, but otherwise it sounds like the contractor is either ignorant of industry standards for this type of arrangement or is trying to do something shady.






share|improve this answer



















  • 1




    It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
    – user71659
    yesterday








  • 2




    What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
    – Pavel
    19 hours ago










  • Can you detail more about how construction escrow works and when it's used? Does the client pay into the account at certain intervals or milestones, or is it all paid up front with regular disbursement to the contractor? If it's the former, I don't really see the difference from paying the contractor directly, and if it's the latter, it sounds disadvantageous for the client.
    – Nuclear Wang
    14 hours ago






  • 1




    @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
    – Hart CO
    12 hours ago










  • @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
    – Hart CO
    12 hours ago


















up vote
17
down vote














Scam. The contractor is trying to transfer liability onto you.



What makes a contractor accountable for getting the job done is the financial peril he faces if he does not. There's the hypothetical distant risk of being sued, but what really keeps him honest is the immediate risk of not being paid.



That is the entire business model of contracting; it's why they get the big bucks. You may notice the raw cost of materials, tool rental and $9/hour Mexican day laborers are a fraction of what he charges. The difference is accountability, he has to get the job done no matter what, including all complications.



By paying up front, you break this accountability model. Because he's been paid, he has no reason to stick out a tough job; he can just say "sorry" or make up a line of bull about the problem being out of scope, and demand more money to finish or simply bail, and leave you with messy unresolved problems, or an unfinished project and a pile of lumber and supplies. It's almost human nature to do so. It is altruism for him to stay with the job once paid.



Humans kinda suck at altruism. This "demanding the money up front when he perfectly knows the business does not work that way" is a great example of sucking at altruism.



And of course, the tension over this unstable relationship will itself sour the relationship, making an abandoned job even more likely.






share|improve this answer



















  • 4




    Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism.
    – Martin Bonner
    13 hours ago










  • @MartinBonner Its probably due to the size of our monkeyspheres.
    – Draco18s
    9 hours ago










  • @trognanders not that much, granted... Alright, I'll remove it.
    – Harper
    1 hour ago






  • 1




    @Harper vote updated.
    – trognanders
    1 hour ago


















up vote
10
down vote













TL;DR: No.



There is no legitimate reason for doing this. It's trying to replicate the invisibility of a cash job with the convenience of not having to lug around briefcases full of cash, with the bonus that the person who opened the account has all the criminal liability.






share|improve this answer




























    up vote
    6
    down vote













    While I wouldn't do it it might not be a scam. Rather, it could be the contractor is attempting to hide money and doesn't want accounts in their name. Maybe the IRS is after them, maybe they have a judgment against them, maybe they owe child support etc.






    share|improve this answer





















    • But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency.
      – Harper
      8 hours ago






    • 1




      @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil.
      – Loren Pechtel
      3 hours ago











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    4 Answers
    4






    active

    oldest

    votes








    4 Answers
    4






    active

    oldest

    votes









    active

    oldest

    votes






    active

    oldest

    votes








    up vote
    37
    down vote













    While a traditional checking account with the contractor's name on it sounds a bit off, it's not uncommon for private contractors to leverage a construction escrow account for larger projects like building a house. This enables a situation where the contractor can get paid for their time as work progresses and doesn't have to pay for materials out of pocket and wait for reimbursement from the client.



    This may be what the contractor in this instance is intending, but an escrow account would have a third party managing release of funds, which is safer than the client owning an account and giving the contractor the ability to draw from it at will, since that could lead to overdrafts and other issues.



    If this is all 2nd hand information maybe there is some communication breakdown, but otherwise it sounds like the contractor is either ignorant of industry standards for this type of arrangement or is trying to do something shady.






    share|improve this answer



















    • 1




      It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
      – user71659
      yesterday








    • 2




      What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
      – Pavel
      19 hours ago










    • Can you detail more about how construction escrow works and when it's used? Does the client pay into the account at certain intervals or milestones, or is it all paid up front with regular disbursement to the contractor? If it's the former, I don't really see the difference from paying the contractor directly, and if it's the latter, it sounds disadvantageous for the client.
      – Nuclear Wang
      14 hours ago






    • 1




      @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
      – Hart CO
      12 hours ago










    • @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
      – Hart CO
      12 hours ago















    up vote
    37
    down vote













    While a traditional checking account with the contractor's name on it sounds a bit off, it's not uncommon for private contractors to leverage a construction escrow account for larger projects like building a house. This enables a situation where the contractor can get paid for their time as work progresses and doesn't have to pay for materials out of pocket and wait for reimbursement from the client.



    This may be what the contractor in this instance is intending, but an escrow account would have a third party managing release of funds, which is safer than the client owning an account and giving the contractor the ability to draw from it at will, since that could lead to overdrafts and other issues.



    If this is all 2nd hand information maybe there is some communication breakdown, but otherwise it sounds like the contractor is either ignorant of industry standards for this type of arrangement or is trying to do something shady.






    share|improve this answer



















    • 1




      It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
      – user71659
      yesterday








    • 2




      What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
      – Pavel
      19 hours ago










    • Can you detail more about how construction escrow works and when it's used? Does the client pay into the account at certain intervals or milestones, or is it all paid up front with regular disbursement to the contractor? If it's the former, I don't really see the difference from paying the contractor directly, and if it's the latter, it sounds disadvantageous for the client.
      – Nuclear Wang
      14 hours ago






    • 1




      @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
      – Hart CO
      12 hours ago










    • @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
      – Hart CO
      12 hours ago













    up vote
    37
    down vote










    up vote
    37
    down vote









    While a traditional checking account with the contractor's name on it sounds a bit off, it's not uncommon for private contractors to leverage a construction escrow account for larger projects like building a house. This enables a situation where the contractor can get paid for their time as work progresses and doesn't have to pay for materials out of pocket and wait for reimbursement from the client.



    This may be what the contractor in this instance is intending, but an escrow account would have a third party managing release of funds, which is safer than the client owning an account and giving the contractor the ability to draw from it at will, since that could lead to overdrafts and other issues.



    If this is all 2nd hand information maybe there is some communication breakdown, but otherwise it sounds like the contractor is either ignorant of industry standards for this type of arrangement or is trying to do something shady.






    share|improve this answer














    While a traditional checking account with the contractor's name on it sounds a bit off, it's not uncommon for private contractors to leverage a construction escrow account for larger projects like building a house. This enables a situation where the contractor can get paid for their time as work progresses and doesn't have to pay for materials out of pocket and wait for reimbursement from the client.



    This may be what the contractor in this instance is intending, but an escrow account would have a third party managing release of funds, which is safer than the client owning an account and giving the contractor the ability to draw from it at will, since that could lead to overdrafts and other issues.



    If this is all 2nd hand information maybe there is some communication breakdown, but otherwise it sounds like the contractor is either ignorant of industry standards for this type of arrangement or is trying to do something shady.







    share|improve this answer














    share|improve this answer



    share|improve this answer








    edited yesterday

























    answered yesterday









    Hart CO

    25.3k16076




    25.3k16076








    • 1




      It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
      – user71659
      yesterday








    • 2




      What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
      – Pavel
      19 hours ago










    • Can you detail more about how construction escrow works and when it's used? Does the client pay into the account at certain intervals or milestones, or is it all paid up front with regular disbursement to the contractor? If it's the former, I don't really see the difference from paying the contractor directly, and if it's the latter, it sounds disadvantageous for the client.
      – Nuclear Wang
      14 hours ago






    • 1




      @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
      – Hart CO
      12 hours ago










    • @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
      – Hart CO
      12 hours ago














    • 1




      It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
      – user71659
      yesterday








    • 2




      What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
      – Pavel
      19 hours ago










    • Can you detail more about how construction escrow works and when it's used? Does the client pay into the account at certain intervals or milestones, or is it all paid up front with regular disbursement to the contractor? If it's the former, I don't really see the difference from paying the contractor directly, and if it's the latter, it sounds disadvantageous for the client.
      – Nuclear Wang
      14 hours ago






    • 1




      @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
      – Hart CO
      12 hours ago










    • @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
      – Hart CO
      12 hours ago








    1




    1




    It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
    – user71659
    yesterday






    It also is used when the construction is being funded by a loan/mortgage. The lender needs to make sure the money results in equity in an asset they agreed to, and the homeowner or contractor doesn't run off with the cash or spend it on anything else.
    – user71659
    yesterday






    2




    2




    What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
    – Pavel
    19 hours ago




    What my family does with contractors here (Europe) is to have an arrangement with suppliers for a sort of limited open account for the contractor with a weekly to monthly review and payment. Not a bullet proof concept, but it shifts the trust relationship to between the customer and the local supplier who isn't that likely to move away with what is for him way too little money, and saves time considerably.
    – Pavel
    19 hours ago












    Can you detail more about how construction escrow works and when it's used? Does the client pay into the account at certain intervals or milestones, or is it all paid up front with regular disbursement to the contractor? If it's the former, I don't really see the difference from paying the contractor directly, and if it's the latter, it sounds disadvantageous for the client.
    – Nuclear Wang
    14 hours ago




    Can you detail more about how construction escrow works and when it's used? Does the client pay into the account at certain intervals or milestones, or is it all paid up front with regular disbursement to the contractor? If it's the former, I don't really see the difference from paying the contractor directly, and if it's the latter, it sounds disadvantageous for the client.
    – Nuclear Wang
    14 hours ago




    1




    1




    @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
    – Hart CO
    12 hours ago




    @NuclearWang It would depend on the arrangement, escrow is a compromise, client would prefer invoices after work is done, contractor would prefer money up front. Often there would be milestones on both sides, ie client puts up $50k at project start, escrow releases $20k for materials to contractor after initial permits are approved, funds are released on a schedule and funds are added on a schedule (time/milestones). When financing construction, the bank typically releases money in stages, this is similar to that.
    – Hart CO
    12 hours ago












    @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
    – Hart CO
    12 hours ago




    @NuclearWang Having a client pay the contractor in stages works too, but escrow provides assurance that funds are available ahead of their need, and a third party controlling the release of funds can be helpful for clients that don't know the industry/process very well.
    – Hart CO
    12 hours ago












    up vote
    17
    down vote














    Scam. The contractor is trying to transfer liability onto you.



    What makes a contractor accountable for getting the job done is the financial peril he faces if he does not. There's the hypothetical distant risk of being sued, but what really keeps him honest is the immediate risk of not being paid.



    That is the entire business model of contracting; it's why they get the big bucks. You may notice the raw cost of materials, tool rental and $9/hour Mexican day laborers are a fraction of what he charges. The difference is accountability, he has to get the job done no matter what, including all complications.



    By paying up front, you break this accountability model. Because he's been paid, he has no reason to stick out a tough job; he can just say "sorry" or make up a line of bull about the problem being out of scope, and demand more money to finish or simply bail, and leave you with messy unresolved problems, or an unfinished project and a pile of lumber and supplies. It's almost human nature to do so. It is altruism for him to stay with the job once paid.



    Humans kinda suck at altruism. This "demanding the money up front when he perfectly knows the business does not work that way" is a great example of sucking at altruism.



    And of course, the tension over this unstable relationship will itself sour the relationship, making an abandoned job even more likely.






    share|improve this answer



















    • 4




      Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism.
      – Martin Bonner
      13 hours ago










    • @MartinBonner Its probably due to the size of our monkeyspheres.
      – Draco18s
      9 hours ago










    • @trognanders not that much, granted... Alright, I'll remove it.
      – Harper
      1 hour ago






    • 1




      @Harper vote updated.
      – trognanders
      1 hour ago















    up vote
    17
    down vote














    Scam. The contractor is trying to transfer liability onto you.



    What makes a contractor accountable for getting the job done is the financial peril he faces if he does not. There's the hypothetical distant risk of being sued, but what really keeps him honest is the immediate risk of not being paid.



    That is the entire business model of contracting; it's why they get the big bucks. You may notice the raw cost of materials, tool rental and $9/hour Mexican day laborers are a fraction of what he charges. The difference is accountability, he has to get the job done no matter what, including all complications.



    By paying up front, you break this accountability model. Because he's been paid, he has no reason to stick out a tough job; he can just say "sorry" or make up a line of bull about the problem being out of scope, and demand more money to finish or simply bail, and leave you with messy unresolved problems, or an unfinished project and a pile of lumber and supplies. It's almost human nature to do so. It is altruism for him to stay with the job once paid.



    Humans kinda suck at altruism. This "demanding the money up front when he perfectly knows the business does not work that way" is a great example of sucking at altruism.



    And of course, the tension over this unstable relationship will itself sour the relationship, making an abandoned job even more likely.






    share|improve this answer



















    • 4




      Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism.
      – Martin Bonner
      13 hours ago










    • @MartinBonner Its probably due to the size of our monkeyspheres.
      – Draco18s
      9 hours ago










    • @trognanders not that much, granted... Alright, I'll remove it.
      – Harper
      1 hour ago






    • 1




      @Harper vote updated.
      – trognanders
      1 hour ago













    up vote
    17
    down vote










    up vote
    17
    down vote










    Scam. The contractor is trying to transfer liability onto you.



    What makes a contractor accountable for getting the job done is the financial peril he faces if he does not. There's the hypothetical distant risk of being sued, but what really keeps him honest is the immediate risk of not being paid.



    That is the entire business model of contracting; it's why they get the big bucks. You may notice the raw cost of materials, tool rental and $9/hour Mexican day laborers are a fraction of what he charges. The difference is accountability, he has to get the job done no matter what, including all complications.



    By paying up front, you break this accountability model. Because he's been paid, he has no reason to stick out a tough job; he can just say "sorry" or make up a line of bull about the problem being out of scope, and demand more money to finish or simply bail, and leave you with messy unresolved problems, or an unfinished project and a pile of lumber and supplies. It's almost human nature to do so. It is altruism for him to stay with the job once paid.



    Humans kinda suck at altruism. This "demanding the money up front when he perfectly knows the business does not work that way" is a great example of sucking at altruism.



    And of course, the tension over this unstable relationship will itself sour the relationship, making an abandoned job even more likely.






    share|improve this answer















    Scam. The contractor is trying to transfer liability onto you.



    What makes a contractor accountable for getting the job done is the financial peril he faces if he does not. There's the hypothetical distant risk of being sued, but what really keeps him honest is the immediate risk of not being paid.



    That is the entire business model of contracting; it's why they get the big bucks. You may notice the raw cost of materials, tool rental and $9/hour Mexican day laborers are a fraction of what he charges. The difference is accountability, he has to get the job done no matter what, including all complications.



    By paying up front, you break this accountability model. Because he's been paid, he has no reason to stick out a tough job; he can just say "sorry" or make up a line of bull about the problem being out of scope, and demand more money to finish or simply bail, and leave you with messy unresolved problems, or an unfinished project and a pile of lumber and supplies. It's almost human nature to do so. It is altruism for him to stay with the job once paid.



    Humans kinda suck at altruism. This "demanding the money up front when he perfectly knows the business does not work that way" is a great example of sucking at altruism.



    And of course, the tension over this unstable relationship will itself sour the relationship, making an abandoned job even more likely.







    share|improve this answer














    share|improve this answer



    share|improve this answer








    edited 1 hour ago

























    answered 23 hours ago









    Harper

    19.1k32765




    19.1k32765








    • 4




      Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism.
      – Martin Bonner
      13 hours ago










    • @MartinBonner Its probably due to the size of our monkeyspheres.
      – Draco18s
      9 hours ago










    • @trognanders not that much, granted... Alright, I'll remove it.
      – Harper
      1 hour ago






    • 1




      @Harper vote updated.
      – trognanders
      1 hour ago














    • 4




      Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism.
      – Martin Bonner
      13 hours ago










    • @MartinBonner Its probably due to the size of our monkeyspheres.
      – Draco18s
      9 hours ago










    • @trognanders not that much, granted... Alright, I'll remove it.
      – Harper
      1 hour ago






    • 1




      @Harper vote updated.
      – trognanders
      1 hour ago








    4




    4




    Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism.
    – Martin Bonner
    13 hours ago




    Actually, decades of communist experiments have proven that humans suck at altruism in large groups. In groups up to 100 or so, humans are very, very, good at altruism.
    – Martin Bonner
    13 hours ago












    @MartinBonner Its probably due to the size of our monkeyspheres.
    – Draco18s
    9 hours ago




    @MartinBonner Its probably due to the size of our monkeyspheres.
    – Draco18s
    9 hours ago












    @trognanders not that much, granted... Alright, I'll remove it.
    – Harper
    1 hour ago




    @trognanders not that much, granted... Alright, I'll remove it.
    – Harper
    1 hour ago




    1




    1




    @Harper vote updated.
    – trognanders
    1 hour ago




    @Harper vote updated.
    – trognanders
    1 hour ago










    up vote
    10
    down vote













    TL;DR: No.



    There is no legitimate reason for doing this. It's trying to replicate the invisibility of a cash job with the convenience of not having to lug around briefcases full of cash, with the bonus that the person who opened the account has all the criminal liability.






    share|improve this answer

























      up vote
      10
      down vote













      TL;DR: No.



      There is no legitimate reason for doing this. It's trying to replicate the invisibility of a cash job with the convenience of not having to lug around briefcases full of cash, with the bonus that the person who opened the account has all the criminal liability.






      share|improve this answer























        up vote
        10
        down vote










        up vote
        10
        down vote









        TL;DR: No.



        There is no legitimate reason for doing this. It's trying to replicate the invisibility of a cash job with the convenience of not having to lug around briefcases full of cash, with the bonus that the person who opened the account has all the criminal liability.






        share|improve this answer












        TL;DR: No.



        There is no legitimate reason for doing this. It's trying to replicate the invisibility of a cash job with the convenience of not having to lug around briefcases full of cash, with the bonus that the person who opened the account has all the criminal liability.







        share|improve this answer












        share|improve this answer



        share|improve this answer










        answered yesterday









        Rupert Morrish

        4,0602831




        4,0602831






















            up vote
            6
            down vote













            While I wouldn't do it it might not be a scam. Rather, it could be the contractor is attempting to hide money and doesn't want accounts in their name. Maybe the IRS is after them, maybe they have a judgment against them, maybe they owe child support etc.






            share|improve this answer





















            • But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency.
              – Harper
              8 hours ago






            • 1




              @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil.
              – Loren Pechtel
              3 hours ago















            up vote
            6
            down vote













            While I wouldn't do it it might not be a scam. Rather, it could be the contractor is attempting to hide money and doesn't want accounts in their name. Maybe the IRS is after them, maybe they have a judgment against them, maybe they owe child support etc.






            share|improve this answer





















            • But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency.
              – Harper
              8 hours ago






            • 1




              @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil.
              – Loren Pechtel
              3 hours ago













            up vote
            6
            down vote










            up vote
            6
            down vote









            While I wouldn't do it it might not be a scam. Rather, it could be the contractor is attempting to hide money and doesn't want accounts in their name. Maybe the IRS is after them, maybe they have a judgment against them, maybe they owe child support etc.






            share|improve this answer












            While I wouldn't do it it might not be a scam. Rather, it could be the contractor is attempting to hide money and doesn't want accounts in their name. Maybe the IRS is after them, maybe they have a judgment against them, maybe they owe child support etc.







            share|improve this answer












            share|improve this answer



            share|improve this answer










            answered 22 hours ago









            Loren Pechtel

            3,27311414




            3,27311414












            • But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency.
              – Harper
              8 hours ago






            • 1




              @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil.
              – Loren Pechtel
              3 hours ago


















            • But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency.
              – Harper
              8 hours ago






            • 1




              @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil.
              – Loren Pechtel
              3 hours ago
















            But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency.
            – Harper
            8 hours ago




            But it has the same accountability problem I discuss in my answer, inflamed by the fact that the guy probably has some accountability/finance/management issues and should not be trusted not to get himself into a bind which causes the project to fail. So here, he would have good intentins +incompetency and he should know that about himself, the scam part is where he rigs the finances to serve his incompetency.
            – Harper
            8 hours ago




            1




            1




            @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil.
            – Loren Pechtel
            3 hours ago




            @Harper As I said, I wouldn't do it. The risks remain, I'm just suspecting it's about hiding money rather than about intended evil.
            – Loren Pechtel
            3 hours ago


















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