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Best way to protect yourself from contractor fraud/misuse of fund

posted by: athensmomof3 on 03.10.2011 at 09:26 am in Building a Home Forum

I have read several posts on here recently about contractors requiring large upfront sums before construction, and the speculation has been that sometimes these funds are used to pay for ongoing projects, etc.

I realize there is some risk inherent in building a house (heard recently of folks GCing a build who paid a deposit for Anderson windows and the supplier went out of business and spent the deposit (small coastal town)), but I want to know the best way to protect ourselves.

Our builder has a very good reputation, been in business as the same entity for years and years (no switching around corporate names, etc.), etc. I suspect, though, in this economy, most builders have some sort of money issues (either lifestyle has had to come way down, etc.). I do have a personal connection to this builder - our parents know each other and have for years, I grew up with him (didn't know him though), we know lots of the same folks, ours is the first house he is building in this area after moving back from the beach, etc. I do think he has some incentive to not cause problems with this build as this is a small town and word would get out and his business would dry up.

That being said, I do want to do everything I can to be sure the funds we are paying are spent on our house, all liens are released, there is no jacking up of invoices, etc. It concerns me and I want to do what I can to protect myself.

He suggested we open a bank account with him jointly that we could electronically transfer funds to pay contractors, and we would of course only transfer the amount shown by the invoices and would require lien releases. I presume we need lien releases before transferring funds? How does that work (I wouldn't think they would release a lien before being paid).

What is the best way to do this?

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clipped on: 05.29.2013 at 02:27 pm    last updated on: 05.29.2013 at 02:28 pm

Small things that get forgotten

posted by: loribug26 on 03.05.2013 at 12:28 pm in Building a Home Forum

I know this has been visited numerous times, but thought I would resurrect it with a new thread since the last one is dated 8/2012 and has this disclaimer at the bottom:

Please Note: This thread has reached the upper limit for the number follow-ups allowed (150). If you would like to continue this discussion, please begin a new thread using the form on the main forum page.

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clipped on: 03.05.2013 at 11:04 pm    last updated on: 03.05.2013 at 11:04 pm