Contractor Talk - Professional Construction and Remodeling Forum banner

1 - 20 of 118 Posts

·
Registered
Joined
·
17 Posts
Discussion Starter · #1 ·
New here...my husband is a contractor and I'm the brains behind him (meaning I do his paperwork...lol). Being a girl, I know I'm in the miniority around here, but I hope you guys can give us some insight.

We are nearing the end of a 203K rehab loan (our first one.) The property was an old schoolhouse built in 1913. The previous owners had started turning it into a residence, but they did a very poor job, so nearly everything had to be torn out.

We have a "fixed price" contract, but the homeowners are insisting that we have to provide receipts for everything that has gone into their house before we will get final payment. The HUD consultant (inspector) told them that they are entitled to any savings :eek: (my husband was there and witnessed him saying this.) He said it's because it's a government loan, so the contract allows for them to keep their savings. The homeowners said their mortgage company is telling them the same thing. They were actually pretty thrifty shoppers on some of the items and picked things that were below budget. They went to Lowe's last night with the bid in hand (an itemized bid was required, so they know exactly what was budgeted for everything) looking for anything and everything that might be under budget. They even have a spreadsheet of everything they've "saved" on.

We do have our attorney involved. He has sent them a letter explaining how this type of contract works, but they have not received it yet...hopefully they will today.

My question is...have any of you ever heard of this? Why would the consultant and the mortgage company tell them this? It has created a huge problem for us. They are wanting some upgrades, but they want a credit for the things they've "saved" on rather than paying for the upgrades. They have turned into the most ugly, hateful people either of us have ever dealt with. After 20+ years (7 years as business owners), it has really soured us both on the whole construction process. No worries, though...we'll be right back at it after this project is completed!!

Any info or advice you can provide would be much appreciated!
 

·
Repair/Remodeling Tech.
Joined
·
1,645 Posts
Tell them, the HUD consultant, and their mortgage company a flat out "No. That's not the way it works." Hand them (all 3 if present) an Intent to Lien notice along with a "THIS, is the way it works in the real world...you'll hear more about this in 10 days.", and 10 days (or whatever is required in your state) later, FOLLOW THROUGH with that and lien the property.

Letters from your attorney, as you have already. Followed by more demanding and more threatening letters.

I can't tell you what to do, but there's no way I would give them any more than a pittance of a discount, and only that if they had my final payment ready to transfer/give to me.

Good luck to you. Sometimes it really is a shame we can't just go into their house (in front of them preferably) and start ripping out things to add up to the value of what we're owed.........then charge them final PLUS again to put it all back in.
 

·
Registered
Joined
·
3,120 Posts
wow. i feel for you. i cant offer any advice but i can empathize with you. I had a customer do me like that once in my earlier years as a contractor and I willingly showed him all my receipts because I went in the hole on the job and kind of wanted him to know it because he was being such a prick. Picked a stain color out for his fence and his wife hated it. I still have the 500$ worth of chit in my garage because no one likes that color and i cant return it. He was trying to hold the last check ($3500) ransom until I finished the job... and that included the insulation I told him I would blow in his attic for free IF he paid his deductible. This was back in the day when no one cared about covering deductibles. HOWEVER he did not pay his deductible. He did give me some referrals tho, which I made very clear that the referrals had to actually get approved and sign a contract with me and pay me in full before any credit was given to him. Needless to say none of his referrals had damage to their roofs so I wasnt going to pay him for wasting my time and gas.

Anyway, I knew i wasnt getting that deductible money so I blew it off but I was already running short after spending 500$ on pink stain, not getting 2k deductible, paying for the mats (twice) and labor out of pocket because he decided not to stain his fence for 5 weeks after we finished the job and was holding that last check til the job was finished... oh not to mention, i had just roofed his mothers house and put armorshield shingles on it ... the delivery guy dropped my materials at 9 pm and didnt notify me... they got stolen and I had to buy about $2000 in materials over again. Plus the bastards went in the backyard, broke in the house(which was vacant) and got both our air compressors and all the guys guns and drills and hammers n chit out of the garage. Thank God, thats all they could fit in their truck. So needless to say I was fresh out of money and this dude was squeezing me for every penny. I had the insulation guy come over and the homeowner said no, i dont want cellulose, I want Atticat fiberglass...(cost difference of about 2700$) I was like well YA AINT GETTIN IT IF I DONT GET THAT LAST CHECK AND EVEN THEN YOU AINT GETTIN IT CUZ 1. I DONT EVEN OWE IT TO YOU AND 2. F YOU AND 3. INSULATION IS FOR CUSTOMERS THAT PAID THEIR DEDUCTIBLE WHICH YOU DIDNT. but ill blow cellulose in there for 300$ if it shuts you up.

I told him, look, I cant do insulation without that last check, i got wiped out on your moms house and i just dont have the money. sorry. but it is what it is. The insulation doesnt have anything to do with the contracted work and payment. The work is complete. payment is due. he said well thats not how i see it... and sorry bout all your stuff getting stolen but thats not my fault. I said youre right and it aint mine either, but I still had to buy all new chit. I would have never approved a material drop at 9 pm. Anyway I never got that last check and every time i see that mofo he says "hey susan! we gonna be getting that insulation you promised us x years ago any time soon" and i go "Yep you sure are!! as soon as you pay for that work we did x years ago!!!" and then i slap him on the back real hard like im just givin him a good ol manly pat... and i walk off. He is my neighbor by the way so i see him all the time. He usually only says that crap when we are at a function and other people can hear him... but i know he is going to do it so im ready to make him wish he hadnt every time.

his wife says if he gives her 20$ for grocerys and the bill is 19.78, he wants to know where his 22 cents is when she gets home. and she is not kidding one bit.

now, i dont show anyone my receipts. i say your profit is none of my business and mine is none of yours... well i haven't actually HAD to say that to a customer.... but you get my point. i am interested in seeing how this turns out tho so please keep us informed.
 

·
Registered
Joined
·
477 Posts
Agree with jp. I will add though, and hopefully your lawyer has looked it over, your contract they signed is what will bind and help you with the issue.

Good Luck.
 

·
Registered
Joined
·
17 Posts
Discussion Starter · #5 ·
We want to wait until the project is done to demand payment/threaten them with a lien because we want to make sure we get the full contract price. But I think you are right...we might need the attorney to send a letter to the inspector and the mortgage company as well. They are seriously misinforming their customers! The homeowner is thinking they are going to get a huge discount off the total contract amount at the end which will then lower their total loan amount and in turn their monthly mortgage payment. This could seriously hurt them financially!! They have bought a new car and they are ordering upgrades that they think will be covered by their "savings."


They are completely unreasonable. We have tried and tried to explain this to them, but they just don't listen. My husband has explained it in person, on the phone and me by email. The last email I sent them was replied to with "I didn't read half of your email..." Ugh! They won't want to hear it, but I'm going to say "Told you so!" when they get the letter. They can ignore us, but SURELY they won't ignore a letter from the attorney. I really blame this all on the consultant because they got obsessed with savings after he said that. It is really sad how much time they've wasted arguing with us and going to Lowe's looking for savings.


No worries...we have made it clear that we are not providing discounts or "trading" savings for upgrades. That is just not how it's done. The thing is...if they were nice, my husband would have done a lot of the things they want done for free or with a nice discount. He knows how to treat good customers. But he will not do that for someone who treats him like they've treated him. (They have a bad habit of calling him on the phone to yell, cuss, etc.)

Yes, the attorney has a copy of the contract. He didn't see anything that would have provided them with savings. I'm usually a really nice person, but they are bringing out the worst in me. I am never present when he deals with getting paid, etc...but you can bet your butt I will be this time just to laugh in their face. They have put our family through 5 months of hell (there is way more to the story than what I've typed here), but that final payment will make it worth it!

Thanks for your input, guys!!
 

·
Registered
Joined
·
333 Posts
"They were actually pretty thrifty shoppers on some of the items and picked things that were below budget."

I'm not fully understanding your agreement, you said "Fixed Price" but where there project items that needed to be decided on by the owners that were designated a certain number, a "budget" and part of your "Fixed Price" contract?
 

·
Registered
Joined
·
17 Posts
Discussion Starter · #7 ·
The morgage company made us type up an itemized bid. This is not something we normally do, but we were told it was required for 203K. I will be researching that some more before we do another one of these! I know the itemized bid is going to be an issue, but we do have a fixed price contract. Nowhere on the contract does it state they get to keep any savings. The thing with these people is that they want all of their savings, but they don't want to pay for anything that was not on the bid (we forgot doorknobs and 4 sheets of plywood on the bid.) But that's why you have a fixed price contract! Everyone is responsible for their part of the contract, no debates.

You guys will get a kick out of this...they are trying to take the purchase price of a drill and texture sprayer out of his labor money because it wasn't on the bid!!! They think they get a credit for that. Wha??? Ths is one of the items on their "savings" spreadsheet.

Here's the thing...the consultant told them they get to keep savings a few months ago. After the last inspection, after seeing my husband's work and how awful the homeowners are treating him, he said he would sign off on the whole amount when the project is done. So which way is it? They get to keep their savings, or they have to pay the full amount? Who makes the rules? And who decides where the savings go? I don't know, it just all seems fishy to me. It sounds like the consultant is making up his own rules.
 

·
Registered
Joined
·
333 Posts
I'm no contract attorney, but the way I see it you're going to meet them in the middle at the very least, but no way are you keeping all of the difference.

I do fixed price contracts with "Allowances" often. I have a full page explaining what allowances are, what happens when the owner(s) spends above and/or below the allowed amount for each item.

I'm looking through the owners eyes:

You give me a bid for a total of $300 broken down as $150 labor, $100 for a door, and $50 for the handset and as the owner you tell me go out and select those two items.
I come back with a $50 door and a $25 handset. No way are you keeping the difference.
If that's the case you dropped the ball with your agreement and didn't explain what happens with the difference.

From what I have read from your posts I believe the owners are interpreting your "Bid Contract" reasonably and rightfully believe the difference is THEIR savings.

Why would you think they were being tight with the purchases? Do you actually believe they were saying in the store, "Oh, lets get the cheapest and stay below the bid so the contractor can make more money"
 

·
Registered
Joined
·
17 Posts
Discussion Starter · #10 · (Edited)
No, no no! Our bid/contract does not include purchase of tools. My husband has all the tools he could ever need. lol

They know he bought these 2 tools (his broke during the course of the job so he bought new ones.) But they are saying that he owes THEM for these tools. I'm telling you, they are not playing with a full deck.
 

·
Registered
Joined
·
17 Posts
Discussion Starter · #11 · (Edited)
Ok, so if you agree with the homeowner, how do they prove what their savings are? They have a huge list of savings that are incorrect because they don't really know the prices. They go to Lowe's and pick out the item they "think" is in their home. They don't have the receipts, we do, because we are the ones who actually purchased the items. Can they honestly make us show all of our receipts before releasing the payment? We have never had to show receipts...ever. Even when we built our own house. The inspector approved the work as it was completed and cut us a check.

Edited to add...they are not just wanting to claim savings on the items they picked out. They are going line by line on the bid and trying to claim things that my husband picked out, price of wire, etc, etc. And they expect us to go through all of our receipts and prove it if we don't agree with the price they have written down. And they are saying the consultant and the bank lady told them that's how it works. Really??
 

·
Registered
Joined
·
65 Posts
Like all the others have said,, Fixed price means that. Don't believe they have a case. So hopefully if the job is 90% complete you have some of the money if not oh boy!
 

·
Registered
Joined
·
17 Posts
Discussion Starter · #13 ·
Yes, this loan allows 5 draws and we just received the 4th one this week. The 5th is released when the job is complete and homeowner and inspector sign off that they agree it's complete. We've received about 75% of the contract price to date and I would say it's about 85% done. He has about 3-4 weeks to go...IF the homeowners don't cause anymore delays. They have been awful about that and then blame him for not getting anything done. Grrrr!! Delays are spelled out in the contract too, so they really don't have an argument there, either.
 

·
Registered
Joined
·
2,213 Posts
There is clearly some confusion here.

First, establish your rights and obligations under your "fixed price" contract with them. If silent in this regard, consult a local attorney, and he/she will likely advise you as to the spirit of the contract that a judge would likely interperet.

BUT, be carefull here. I do not screw with 203K loans.... but be aware that, either 1) assuming your contract evidences somehow your agreement to accept FHA 203K terms, or 2) the FHA is not obligated to disburse to you on behalf of their borrower contrary to their loan terms ......... (Your recourse would be only against the client)

that government loans can have terms that by law override the terms of a contract.

I do not know that 203k FHA Reno loans do... I am not familiar with them.

But I do know that VA loans have terms, by law, that grant certain rights to borrowers regardless, and not withstanding, the terms of a sales contract.

A good lender familiar with 203K programs may be a better source than a general attorney.

Good luck

Best

Peter
 
  • Like
Reactions: Rio

·
Registered
Joined
·
17 Posts
Discussion Starter · #15 ·
Can someone tell me where to find the terms of a 203K loan? I have searched and found some documents, but I'm not sure if they are the "official" documents for 203K. We were provided nothing that stated any additional or alternate terms, nor did we sign any such document. What I have found online does not say anything about the borrower getting to keep the savings.

They (the lender or the consultant) have not asked for any receipts up to this point. It seems like to me they would be asking for them with each draw if this was in fact the case. Who wants to wade through nearly $100,000 worth of receipts at the very end of the project? I don't even want to organize them for tax time!! lol
 

·
Registered
Joined
·
1,015 Posts
We have a "fixed price" contract, but the homeowners are insisting that we have to provide receipts for everything that has gone into their house before we will get final payment. The HUD consultant (inspector) told them that they are entitled to any savings (my husband was there and witnessed him saying this.) He said it's because it's a government loan, so the contract allows for them to keep their savings. The homeowners said their mortgage company is telling them the same thing.

The homeowner puts cash in their pocket or the loan closes at a lower amount?
 

·
Registered
Joined
·
17 Posts
Discussion Starter · #18 ·
Well, they have asked us to write them a check for their savings...uhh, sorry...we were not born yesterday. I think they now realize IF there are any savings, it will come off of their total loan amount at the end.
 

·
Registered
Joined
·
1,015 Posts
Seems like a lot of paperwork and hoops for the payoff. Kinda like insurance work at times.

Good luck with your end result. Hopefully you have some other work lined up outside the circus that will pay as they should.
 

·
Registered
Joined
·
17 Posts
Discussion Starter · #20 ·
Thanks for the link, kevjob. I have looked through most of it and this is the only thing I found that even comes close to our situation...

"If the owner does the work and it only cost 60% of the line
item for materials, upon completion of the work item, the
draw release would be 100% minus 10% holdback, thereby paying
the owner for the "sweat" in completing the work. If the
owner subcontracts the work for less than the line item, then
100% of the line item would be released upon completion minus
the 10% holdback."

Now I realize the owner didn't complete the work or hire a sub, but to me this sounds like each line item is paid out at 100% (minus 10%) when it's done. This is the way it has worked from the beginning, so I can't imagine they would change it for the last draw.

I am just at a loss as to what the HUD consultant could have meant when telling them they get their savings. Or where he got this information.

We do have other work lined up, but 100% of our time is being spent to get this one done. We are ready to get it out of our hair!
 
1 - 20 of 118 Posts
Top