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How Not To Get A PPO In The Construction Industry
3 months ago


The problems associated with construction payments are an issue that has haunted homeowners for years. Unfortunately, these problems aren't new. They've been with homeowners for decades. Unfortunately, these problems aren't limited to just new home buyers. In fact, problems with construction payments are common to almost every homeowner who purchases a new home. Yet, even when problems are prevalent, many people still don't have a strategy for dealing with them. Read on from this article to learn more.


The first step to solving a problem with construction payments is to identify it. When lenders, subcontractors, and suppliers to submit final offers to purchase your home, they typically include language that includes language stating that borrowers will need to submit preliminary notices of deficiencies (POE). This is simply used as a way of providing builders with the outline of their obligation. It is also a convenient sales letter, allowing them to get paid faster.


The problem with making construction payments on time is that many builders get behind on them. To complicate matters, many lenders and subcontractors tack on late fees and interest to the overall balance. This means that instead of receiving advance payments from suppliers or manufacturers, homeowners are stuck paying these high costs all throughout the construction process. If they're already behind, the lenders and subcontractors can take weeks or months to catch up. If the contractors continue to not pay, then the days sales outstanding can get longer until the entire balance is in arrears.


Some people try to circumvent the problem by notifying their contractors ahead of time that they'll need to submit a PPO. However, this is often unhelpful. In fact, it's rarely successful. Lenders and subcontractors simply don't understand why homeowners would want to submit a PPO, which is why it's almost never accepted. As mentioned above, it's counterproductive for contractors to submit a PPO if they're behind on construction payments. However, if they do submit one and the lender or subcontractor discovers that the homeowner is behind, they may be forced to cancel the loan early.


Another common strategy to avoid or delay the release of past due construction payments is to contact delinquent subcontractors directly. If the company is slow to respond, it's perfectly acceptable to call them directly and ask if they'll work out a payment plan. While it's rare that a company will agree to work out a payment plan without first contacting the homeowner, sometimes it's an easy way to get a contractor to agree to a temporary payment plan.

One final issue that many borrowers have had issues with is slow payment processes. While some companies and lenders have been diligent about catching up on past due invoices, others have made it very difficult for borrowers to submit past due payments. Slow payment processes often means lower pay outs to contractors and subcontractors. In some cases, even submitting a late payment may not be an option because a client may already have gotten into a binding contract with a company. To make sure that your construction payments are handled properly, be sure to check with your company's payroll and management system to see exactly how much money is available to borrowers each pay period. See more here...


Learn more from this related article: https://www.huffpost.com/entry/technology-is-rebuilding_b_9533496

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