Why Contractors Ask for Money Before They Start

A contractor walks your basement, measures, and emails you a proposal three days later. There is a number at the bottom and a smaller number above it marked deposit. That second number exists because the job starts costing him money before it produces anything you can look at. Material gets ordered. Dates come off his calendar. Both of those happen while your basement still looks exactly the way it does right now.

Material is the part homeowners underestimate, because material arrives quietly and gets stacked in a garage. Flooring, fixtures, and anything cut to size are ordered against your job specifically and cannot be moved to somebody else's. A contractor who orders your tile in week one has put his own money into a house that is not his.

The calendar is the other half and it is harder to see, because nothing about it shows up on an invoice. A week held for your basement is a week that cannot be sold twice. When a contractor blocks out the second half of April, the cost of that decision lands whether or not your job actually happens.

The deposit feels like the risky moment because it is the first time money leaves your account for something that does not exist yet. It is not the risky moment. It is the smallest payment in the schedule and the one with the most work still standing between you and the end, which is worse, because the larger payments arrive later, when there is less left unfinished for you to hold back.

The useful question is not how much the deposit is. It is what this specific money buys. A deposit with material behind it can be itemized out loud: the tile, the fixtures, the deposit his own supplier is asking for. A deposit with nothing behind it cannot be itemized, and the answer arrives as a general statement about how he runs his business. That sentence belongs in an email, not in a driveway.

There is a version of a service agreement where the deposit is not a separate act of faith. The scope of the work and the money for the work are the same object. The customer funds the contract before work begins. The money is held until each milestone is complete, and that portion releases to the provider. What changes for the homeowner is that the money leaving in March is attached to something written down rather than to a conversation in a driveway.

Rules about deposits and advance payments vary by state, and some states regulate them directly. This article is about what people commonly do, not about what any law requires. For what a specific state's rules actually say, see the deposit guides in the knowledge base. On the size of the deposit rather than the reason for it, see is 50 percent up front normal.

The deposit is not really the decision. You are going to pay this contractor either way, and the deposit is the first and smallest piece of it. What you are deciding on the day you write that check is whether the rest of the money has anything holding it in place.