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Getting paid by escrow

Ken C.
Ken C. Member Posts: 267
Here’s my situation: A couple who just bought a house wants to hire me to do several small-to-medium plumbing jobs totaling a decent amount of money. Soon after looking at the work, I e-mailed a proposal with my prices, also stating my terms that I am to be paid as soon as I finish the work.

The husband called me and said my prices are acceptable and he’d like to hire me, but payment would come from an escrow company or escrow account. The sellers knew the house needed many plumbing repairs and set aside some money in escrow, he said.

I told him I didn’t like to wait for my money. He said if the escrow company didn’t pay me in a reasonable amount of time, then he would pay me himself. I basically told him I needed to think about it.

I’ve never dealt with this situation and it raises several questions, most importantly, how quickly would I get paid? Would it be a hassle getting paid (for example, would a representative for the escrow company have to inspect my work before releasing funds)?

Has anyone here done work and got paid in this way? Was it a positive or negative experience?

On one hand, the couple seems very nice and this is a very lucrative job, with the likelihood of even more future work, given the neglected condition of the house. On the other hand, I’m not sophisticated in matters of real estate finance/escrow, and don’t like complications/hassles when it comes to getting paid for my hard work. What should I do? Any advice appreciated.


  • lchmb
    lchmb Member Posts: 2,997
    up front?

    I would require at minimum 50% up front, and a letter from the escrow company stating they authorize the work and accept the term's you put forth. If not you may end up chasing your tail for a long time to come...good luck
  • Mike T., Swampeast MO
    Mike T., Swampeast MO Member Posts: 6,928

    Here's the definition of "escrow":

    1 : a deed or bond, money, or a piece of property delivered into the keeping of a third party by one party to a contract or sometimes taken from one party to a contract and put in trust to be returned only upon the performance or fulfillment of some condition of the contract or to insure such performance or fulfillment by some other disposition

    In other words, VERIFY THROUGH THE THIRD PARTY that the funds for this purpose actually exist in escrow AND ALSO REQUEST FROM THE THIRD PARTY THE CONDITIONS REQUIRED TO FULLFILL!!!!

    If there is no DEDICATED escrow FOR THIS EXACT PURPOSE, I'd suggest that you walk away! Why? Because if X dollars of escrow exist for "improvements" the homeowner could very well overspend with you winding up "in line"...

    If you find the conditions required for fulfillment in any way questionable, I would also walk.

    NEVER forget that escrow is a THIRD PARTY situation the purpose of which is to ensure that the needs/requirements of the other two parties are fulfilled. For the "REAL DEAL" YOU MUST HAVE A WRITTEN CONTRACT WITH THE THIRD PARTY!!!!!!!!!!!!!!!!
  • Dan Foley
    Dan Foley Member Posts: 1,258

    Have the homeowner pay you direct and let them wait for the escrow money. That is how we typically deal with the situation. It may be a cynical response but it comes from being the nice guy getting burned once too many. -DF

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  • Ken C.
    Ken C. Member Posts: 267
    My feeling is that ...

    .... most plumbing companies would deal with it the same way you said.

    I like to keep things simple, and this escrow stuff is way too complicated for me.

    I'd really like to work for these people for the reasons I listed earlier, but my gut is a bit uneasy. I know you can't always judge a book by its cover, but there's something that struck me a bit off:

    Though it was a bit neglected and the rooms have ugly '70s decor, the house they bought is in a very nice neighborhood near the ocean, and I'm guessing it would be worth at least $600K spruced up. Yet, they both drove very modest, older vehicles. Could they have perhaps overextended themselves buying the house? Maybe, or maybe not, can't always tell by appearances.

    Still, most companies would play it the way you said. Better to lose a job than lose $500+ in materials and two days' worth of labor.
  • Rich Kontny_4
    Rich Kontny_4 Member Posts: 73
    Been there done that

    I have done many escrow account type jobs and have never been burn't. Mike's description is very accurate as far as a third party goes.

    Any amount here in Wiscosin that is held in escrow is a minimum of one and one half times the value of the work to be done. This gives the owner big incentive to get the work done in order to free up the 50% that belongs to him [or her]

    Verify in writing the pay procedure from the lender or title company. Also do not give a lien waiver (a glorified receipt] until the payment has cleared your bank.

    Once again I would not hesitate to take this job as the owner has vested interest in getting it done and getting you paid in order to free up the money he has held in escrow.

    Rich K.
  • clammy
    clammy Member Posts: 3,113
    gut feelings

    ever time i have ever got burned there was only one reason i got burned is i did not listen to my gut and time to time i forget to listen and get burned again but i try hard to listen to it in bussiness i feel my gut is smarter then i at least it knows when to take a break and eat ,i always judge exactly how it feels and if it don't feel right i let some one else get hosed peace and good luck clammy
    R.A. Calmbacher L.L.C. HVAC
    NJ Master HVAC Lic.
    Mahwah, NJ
    Specializing in steam and hydronic heating
  • ALH_4
    ALH_4 Member Posts: 1,790

    Incidentally, FHA does have a 203k program specifically for this purpose. They will load up to 110% of the value of the home after the improvements. Invoices are approved by the owner, then sent to the bank for payment.

    As Mike said, it seems like a good idea to verify the conditions to be met before beginning the work. It may affect what you charge. Did you provide an estimate so they could determine the amount of money to set aside for the improvements prior to their setting up of the escrow account? If not, someone must have. If it was someone else, perhaps you could request to see that estimate (even if it is minus the dollar amounts) in order to get an idea of what the other contractor was planning.

    If I were you, I would talk to their loan officer before proceeding.
  • Dave Yates (GrandPAH)_1
    How we determine who pays

    Who called to authorize the work? That's who is responsible to pay our bill. It's not my job to deal with the escrow company unless they called.

    It doesn't say "Bank" or "United Way" on the side of our trucks.

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  • ALH_4
    ALH_4 Member Posts: 1,790

    I think the only difference is where the check comes from. It might take a few extra days, but at least you know you will be paid. It seems like a relatively minor inconvenience.
  • Tom Hopkins
    Tom Hopkins Member Posts: 554
    Escrow Accounts

    I get paid from escrow accounts on a semi-regular basis. Usually it's associated with new construction or significant (loan originated) home improvement projects. IMHO it's a decent guaranty that I'll get paid. In this instance I would contact the lending institution holding the monies and move forward based on their promise. If it's monies held from a sale the $$ are there. As long as both parties are in agreement as to what work needs to be completed before the money is released and the amount is clear there should be no problem. Be aware that banks like to hold onto "other peoples money" as long as possible because they can accrue interest daily. If you can get a signed agreement that you will be paid immediately "upon completion" you should have no problem.

  • hr
    hr Member Posts: 6,106
    Same as a title company?

    On all my new construction jobs the checks come from a title company. I have to sign a lien release to get the check, usually. The title companies that know us just send the lein waver with the check.

    hot rod

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  • Maine Doug_65
    Maine Doug_65 Member Posts: 24
    Do you NEED the job?

    If not, say no thanks and stay busy elsewhere.
  • Rich Kontny_4
    Rich Kontny_4 Member Posts: 73

    If they do not get a lien waiver they do not have clear title to the property. This is a very safe procedure for all parties involved!

    In bid and spec work we would issue partial lien waivers after progress payments were received.

  • bob young
    bob young Member Posts: 2,177

    Just keep in mind that if you are not a licensed , registered plumbing contractor with INSURANCE et al you may never get paid. gents that do side work do so at their own risk.
  • Ken C.
    Ken C. Member Posts: 267
    Good point,

    However, I am a licensed master plumber and am insured.
This discussion has been closed.