We are purchasing a home that requires remodeling. Our loan requires that checks for the remodeling be made payable to the contractor. We want to maintain control over the project. Can a check be negotiated by us, the buyer, if the title company makes the check out to "(our names) for (contractor's name) D/B/A (contractor's business)"?
Theoretically yes, since the wording of the check makes you responsible for passing the funds along to the contractor. In such a case, your title company or lender would likely require that you get a receipt from the contractor to assure the lender that the contractor had been paid.
The reason the lender calls for the checks to be payable to the contractor is to protect the lender from liens that the contractor could place on the property if services or materials are not paid. In some states, that contractor's lien would take precedence over the lender's lien on the property. Although checks issued as you wish can be negotiated, you will need agreement from the lender, the contractor and the bank holding your deposit account before you can do business that way.
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
Theoretically yes, since the wording of the check makes you responsible for passing the funds along to the contractor. In such a case, your title company or lender would likely require that you get a receipt from the contractor to assure the lender that the contractor had been paid. 