Typically, the holdback of 10% or more (of the total job) is the final payment - i.e. you don't give the contractor the final payment until EVERYTHING is completed to your satisfaction. Your original contract should include the payment schedule and usually the finaly payment is around 10%. Contractors will often try to pressure/cajole you for the final payment before everything is done but don't give in - you may never see them again. Sometimes conractors will walk away without the final payment because they figutre it isn't worth their time.

Lien laws vary from state to state. I can't help you with that.

I don't know what most people do, but we owe our contractor 15% of our remodel (we are almost finished). When it is completely finished and we get the lien wavers, then we will give him 7.5%. We are holding the final 7.5% back until 30 days after completion to make sure there are no little problems that he needs to take care of.

I am also concerned that I may not be getting releases from all of the subs -- I know the big ones -- the flooring, the stucco, the electrician, the painter, the tile guy and the plumber. Beyond that, we may have to pay if one of them claims my contractor hasn't paid.

1) My bank would only issue a check for 90% of each requested draw amount. Once the job was completed, they issued the final draw plus the previously withheld amounts in one check.

2) I would get lien releases from ALL subs that have worked on your job, not just the ones that have provided you with a "right to lien" letter. Personally I've never heard of or received a such a letter, and I GC'd my own project. I never had contracts, and only sometimes had estimates that I signed. The bank's take was that any one of these persons could "come out of the woodwork" to put a lien on my home and that's why I had to give the bank the lien releases as the appropriate jobs were completed. If only part of the job - say, the plumbing rough-in but not the final - was completed and the plumber needed a payment, I was required to have him sign and provide to the bank a partial lien waiver in anticipation of the payment, before the bank would release those funds. Of course, your state laws may differ, but my bank is Bank of America and I kind of doubt that they edit their procedure from state to state.

I can't thank you enough for these responses!

weissman--Thank you for confirming what I thought: the contractor holdback is typically a percent of value for the entire job.

And yes, momtotwinboys, I am very unsure how I'm supposed to know who all to request a lien release from?? I was thinking the same thing that I know the "big" subs--plumbing/electrical/HVAC/drywall etc-- but surely there are other folks too and what if one of these guys have "sub subs" and what if they come later saying they haven't been paid?

tracie.erin-thank you for sharing the process for BofA releasing your funds, that was very helpful. It's easier when the bank is the "bad" guy requiring the holdback and lien releases and removes you from having to negotiate anything with the contractor.

I've read to tie payments to milestones-our contractor intends to bill monthly for work that has been completed and really pushed back at the idea that I would hold back 10-15% of that because the work would be complete and he would be owed this.

(and momtotwinboys-I couldn't imagine negotiating with our contractor that he'd receive his final 7.5% of the job 30 days after completion. How did you swing that?)

I worry if I just try to just hold back something out of a final payment,it won't be enough of an incentive to keep him on the job if anything goes wrong...?

Can anyone else offer feedback about what your lender requires and/or what you've negotiated with your contractor about the holdback?

I'm learning a lot-thank you!

I don't have personal experience since we DIY'd and GC'd our own project. However, over the years, I've read of forum members who have insisted on paying the subs directly to avoid any issues with them not being paid by the GC.

I am the poster child for what weissman wrote. It does happen. Please, please, please, hold back the 10% and maybe even the extra for 30 days. Some of the very visible problems we have were not noticeable at the time they were last in my house. We have nail pops, cracks, tape pulling away, etc... and those were not evident at the time they did them or since we did not realize that their last day was their last day, did not go over everything with a fine tooth comb. We expected them back. Because they took so long to not finish the rest of our project, there was time to see all the things that came out.

I gave in to them pressuring me to pay up sooner as they kept saying they were "almost done". Well, it turned out that much of what was "done" needs to be repaired and the other not done stuff, never got done. I screwed up so close to the finish line and I can't rewind and do better.

DO NOT make the same mistakes I did!

dianalo-I'm so sorry to hear what you've gone through. It's so valuable when folks like you who've been through this share with those of us contemplating and/or just getting started to warn us about these pitfalls so thank you!

Before this thread it would have never occurred to me to delay the payment until after completion. Have others of you---like momtotwinboys---successfully negotiated such a late final payment for after completion?