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Discussion Starter · #1 ·
Okay group, I am looking for some advice.
I am a one man show building a house for a client. This is my first home that i have stick built since being on my own. I bid the house out for the client. So it was a set price. Around here most of the builders bid their work, not a cost plus bid. So i bid it that way. Well that is where i went wrong. So now i am close to finishing the home, but i am short on money to pay everyone that needs paid. So here is were you all come in. How do you finish a home and pay everyone when there is not enough money to pay the subs and some materials? I am thinking about filing for bankruptcy, but i don't want to hurt my clients or the subs. Most of them are friends of mine. I really don't want to file, i have been trying to work with the bank, but i don't have enough credit to even try to get a loan to pay the subs and finish the home. Do you have any ideas or suggestions?
 

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Get a loan from your house? Borrow from your IRA?

It looks like you made some big mistakes and might learn from the school of hard knocks.
 
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I can't offer any advice from experience because fortunately I have not been in your spot.

But you have the attitude in not trying to cut and run. (like so many do)

I hope there are some viable avenues presented here for you to make it all work out.
 

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Maybe have a heart to heart talk with your client. Explain how you under bid the project and how you (and they) are now at a very bad spot in all this. Maybe you can work something out where you finish working at cost and in return they pay everybody off. The alternative unfortunately for them is a buch of leins against their new home.
 

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Personal Loans. Not that I underbid a basement project by $5k and have been paying for their materials out of my own pocket for the last month.

I'd sit down with the client and let them know the situation. That you want to make sure their house gets done and everyone else gets paid.

If your that short on money they probably realized they were getting great deal at the beginning and were wondering why. Now they'll know.
 

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Discussion Starter · #6 ·
Thanks for the advice. It seems that I have been learning from the school of hard knocks for sometime now. I don't want to cut and run. I put myself in this position and i just want to salvage something from it. I have tried personal loans but i am to new to have any credit with the bank that they wont even look. They told me to file for bankruptcy, but I can't even think about that. I have thought about talking to the homeowners like Mike said and that might be the only option that I have. Once again thanks..
 

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Thom
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filing for bankruptcy gets you out of the situation, it does not solve the situation.

Like others have said, you need to be honest with your customer. The subs and suppliers will file liens against the house and the owner will be forced to pay them anyway.
 

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How do you finish a home and pay everyone when there is not enough money to pay the subs and some materials?
1) Stop immediately, don't finish the house.

2)Take all the money you have and talk to the subs and the suppliers. They will, most likely, settle for less than they are owed. Have them agree (in writing) not to lien.

3) Last, talk to the homie. Tell them you are unable to finish the house, but there will be no liens. The homie has a choice of either keeping you and paying more or hiring someone else and suing. When they sue file for bankruptcy.

Mark

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Are you inexperienced at bidding or did something go horrible wrong? Around here a buffer for a small new house is 30-40gs before we break even.

Personally I would stop all work have a meeting with the HO and show them the big number of how short on money you are. Explain to them there are a couple of option to get the house finished. 1 they can keep you and they pay the extra money to finish. 2 they don't pay and they get a bunch of leins on there new house. 3. Bankrupt
 

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People will surprise you

Some great advice in this thread.

I think people will surprise you. If you where one of 3 bids say and you got the work because you where 30K under the client will have an idea what it should have, could have cost them. Now you have the big heart to heart and you figure you need another 25K to finish the job they in this situtation will still be ahead 5K over the closet bid.

If you have struggled and made errors that have cost time and materials the client might not be so willing.

Seems to me your head and heart are in the right place - leave your pride at home and ask your clients for help. Explain what you have above and I bet you two or three will come to a acceptable agreement.

Clients always surprise me - good and bad.
 

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Got respect for you for trying to make it right and not running like most do. Hope it works out for you. Keep us posted on how it works out.
 

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JimmyS
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btdt

I imagine many members here have been in your shoes. Those meetings where you humble yourself to the HO are tough but necessary. I hope your project has met their expectations all the way along - that will give you a leg up. If they're unhappy with the workmanship or schedule, or had a fight with one of your subs, it'll be a harder task.
Before you meet, get your ducks aligned. You need to present figures on paper: where you are at, where you need to be to finish, with all permits signed off and bank and contract satisfied. Don't present any number you aren't sure of - you don't want to repeat this meeting!
Don't mark up anything at this stage - present the numbers that are your cost. You should get a wage but no more. That's your tuition - the hard knocks are the meeting, plus finishing the job. None of this is your subs' fault, and they should be paid in full. I agree with others you may be surprised to find your HO decent about it.
Good luck - it's no fun, but better than running from it.
Jim
 

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Discussion Starter · #13 ·
Thanks for all the advice. I knew if i posted something I would get some good responses. I wasn't going to post anything at first because of the situation that I am in but I just needed so help. I am currently not stopping work, just want to finish what I started. I have talked to some of the subs and let them know what is going on and that I am trying everything I can to get them paid, because it is not there fault at all. I am relatively new at bidding projects and still learning. This is how new I am, to be honest I bid this home at $110.00/sq ft. and the house is about 1600 sq ft. But I upgraded them to a geothermal heat and added spray foam for the exterior walls. I have never marked up my subs or the materials. I am probably going to talk to the HO and let them know what is going on. I am sure they kind of already know because the subs have been calling them about getting paid. Any way thanks for the support. Matt
 

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Matt .... sorry to hear about the situation you are in. I am curious though.. Here in Alberta, Canada it is not cheap to build a house. I can, however, build a fairly nice house (2 storey) with some nice middle of the road finishings for less than what you are charging your customers / sqft. (COST). I am not trying to be an ahole here but are you in the situation because of the costs that you have incured during the project or because of bad money managment?

I have no idea what finishing you are doing in this house but like I said for $110.00/sqft. I can see that you will not make a ton of cash but if all of the money has been fairly spent on T&M I would take everyone's advice and sit with the ho's and explain the situation. I would be 100% prepaired, however, to justify where the money has gone with a full accounting ledger.

Cheers
 

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It's very encouraging to see someone actually try to solve payment issues by being honest. Speaking as someone who spends entirely too much time chasing down my hard earned money from runaway debtors I feel a little better knowing that someone is trying to face a problem head on.

Give your subs a chance to work something out with you for a payment plan, and stick to it. Call them first and for crying out loud don't wait for them to hunt you down before you deal with them,it will only make the situation worse.

Don't tell them what the want to hear, tell them the truth. I hope it works out for you .
 

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Discussion Starter · #16 ·
Tattoo.. Thanks for the post, the price I gave them was with the geothermal but the sub had a lower grade in his bid and I didn't realize that at the time. So i upgraded to the better one. The spray foam was also added after the bid was done. The part of the problem of the money was that I had to tear down the old house and build the new one in its place. That started with a huge hole to fill. The garage had 8 foot walls instead of 4 foot that I bid. Then to fill the garage and the hole in front of it took 350 ton of rock. So I had costs that I wasn't counting on. Some of it was me because it is taking longer to finish the house than I expected. I was hoping for 5 months not the 8 that i am on now. So in a nut shell that is was happened. I guess I know I should of done change orders for upgrades, but I thought I could get it done in the price. One thing I did wrong on the price was price different subs that were out of town and used some of their pricing but still used my local subs for the job. For example the company that I usually use for the insulation is an out of town company. Their price for the spray foam and insulating the attic was $4650. The local guy that I used for the spray foam, his price was $4500 just for the foam and didn't do the attic and the attic was $1250 more for me to do. So I guess that it is me doing wrong things... Matt
 

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Bid prep

When bidding you need the subs to submit written quotes with an EXACT scope of work. The clients need to sign CHANGE ORDERS on everything and pay in advance because your cash flow goes out the window when you add to the contract. This is where you are today.
 

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Discussion Starter · #18 ·
A follow up on what is going on... I am getting a little help from my family on working with the bank on getting everyone paid. So I am trying to finish the house, got about 3 weeks left. Just cabinets and countertops left when then come in. Then onto working for someone else for awhile. Time to get off my butt and support my family. Well thanks for all the advice, ideas and suggestions. Matt
 

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Thanks for all the advice. I knew if i posted something I would get some good responses. I wasn't going to post anything at first because of the situation that I am in but I just needed so help. I am currently not stopping work, just want to finish what I started. I have talked to some of the subs and let them know what is going on and that I am trying everything I can to get them paid, because it is not there fault at all. I am relatively new at bidding projects and still learning. This is how new I am, to be honest I bid this home at $110.00/sq ft. and the house is about 1600 sq ft. But I upgraded them to a geothermal heat and added spray foam for the exterior walls. I have never marked up my subs or the materials. I am probably going to talk to the HO and let them know what is going on. I am sure they kind of already know because the subs have been calling them about getting paid. Any way thanks for the support. Matt
Damm Matt you seem like a nice guy but your lookin at getting your ass handed to you. No markup on subs/materials, eating the extra's out of pocket??? Meet with the homeowners immediatly and plead ignorance cause its true.
 

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My friend I'm sorry to hear about your situation, you need to put the ball in the homeowners court. It is the homeowners decision to make this right or not. Go directly to the source (the home owner) with all your facts in order. Put together a breakdown of all change orders, add-on's, unexpected situations that called for additional material & labor. Tell the homeowner that due to these things the price is going to be adjusted by however much is appropriate. Dont eat it on this one, there are always modifications, change orders and add ons. Apologize for not notifying him sooner and hand the guy a bill for these things. Tell him he has to pay. That's it....
 
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