There are many honest Contractors out there, but there are also quite a few bad contractors that might be looking to rip you off.  While I have never been a victim of a Contractor scam, I know many who have.  If you’re about to undertake a big renovation project, learn how to protect yourself from shady actors.

Interesting point to bring up: Not all states require people who register as contractors to take classes, or prove their experience.  It really is so easy that any average Joe can get licensed as a contractor, and with the construction industry so busy right now, I guarantee you there are a lot of bad contractors out there right now.

So when is it okay to hire a licensed general contractor who is does not do the work themselves?  When they hire specialty subcontractors to do specific work that is either not their area expertise or requires a specific license that some general contractors do not have.  A few examples of subcontractors include: plumbers, electricians, and HVAC.

Read on for some tips on how to hire a good contractor, some red flags to look out for, and general best practices when hiring anyone to do work on your property.

5 Tips to Avoid Miscommunication & Deception

1. 1. Clearly define your project.  Before you begin talking with contractors, pick up remodeling magazines, search the Internet for information on designs and materials, and then put your ideas on paper.  Even rough ideas on paper are better than nothing at all.  It will give a potential contractor a better sense of what your expectations are and what you’re hoping to accomplish.
2. 2. Do you need a general contractor?  Once you know what you want, consider what you realistically can accomplish on your own.  For larger projects, especially those that involve more than three different service providers, you may need a general contractor.  *HINT: If you are eliminating walls, adding rooms or doing anything that impacts the structure of your home, an architect or structural engineer may be a good idea.*
3. 3. Ask around.  Check with neighbors and friends who’ve had work done for references.
4. 4. Do your research.  Don’t hire based on just a conversation or two.  Check the performance record of the contractor through Angie’s List and other resources.  Get names of previous customers and find out if they were pleased with the work and the timeline of the project, as well as if they’d hire the contractor again. Get the names of subcontractors and ask if they work with the contractor often and whether he pays on time.
5. 5. Always look them up on your state’s website to make sure their license is active.  In states or cities where licenses are required, don’t rely on the contractor’s word to know whether his or her license is valid: check it out through the appropriate agency.  Several times I’ve looked up a contractor only to find that their license is inactive on my state’s website. If their license is inactive, it is the same as hiring a non-licensed person to do work on your home, and that puts you at risk.  Also look on your state’s website to see if they have any violations.

10 Red Flags to Spot Bad Contractors

1. 1. Someone who is too available.  Let’s assume you call a contractor, and they offer to come look at the job in the next hour.  That’s a big red flag to me.  Most good contractors are booked out a few days if not weeks, so if they are available right away that’s concerning.  There may be an exception to this, like if they just to happen to have another job in the same neighborhood, though this is rare.
2. 2. Someone who is not available enough.  As in any long-term relationship, communication is key.  If you have trouble getting a contractor on the phone before you give him your business, imagine how hard it will be for him to return calls after he already has your security deposit.
3. 3. A contractor who is asking for too much money up front.  Most contractors won’t start a job without getting part of the payment upfront.  After all, there are materials to buy and workers to hire.  But a contractor that wants the entire sum up front should set off alarm bells.  We’ve all heard those horror stories of people who saved up a lot of money to remodel their house, and the contractor demands payment up front, which they do, only to never be seen again.  Don’t let this happen to you!
4. 4. They are really pushy.  This falls into the not busy – desperate for work category.  If they are really pushy to start and that you hire them, that’s a red flag.  Qualified contractors don’t need to use high-pressure sales tactics that sound like they’re trying to sell you products As Seen On TV.  A home repair or renovation is a serious investment, and a good contractor will understand that it’s worth your taking a few days to think it over.
5. 5. They want to be paid in cash only.  Some contractors will ask to be paid in cash, which is a sure sign that there is something shady going on.  They are likely trying to reduce their tax bill, but their could be an ulterior motive as well.  Without a check or credit card statement to back you up, it becomes your word versus the contractor’s in any payment dispute.  So even if a contractor offers you a cheaper rate if you pay in cash, don’t take the deal.
6. 6. They avoid answering your questions or giving references.  If a contractor refuses to give you references, it’s a sure sign that something is amiss.  Every contractor should have a few pleased customers that can vouch for past jobs.  If a contractor says he’s just starting out and doesn’t have references yet, take a pass and find someone with more experience.
7. 7. Too many subcontractors.  A good contractor will know how to use subcontractors wisely.  For instance, if there’s a particularly tricky wiring job, it’s a good idea to call in an expert electrician.  But a contractor who is overly reliant on subcontractors should raise some red flags.  If a contractor is farming most of the work out to subcontractors, then he’s acting more like an unnecessary middleman rather than a essential part of the renovation process.
8. 8. A truck for an office.  If a contractor doesn’t have an office with an actual address, don’t hire him to work on your home.  Some contractors will tell you that they are so busy, they mostly just work from their trucks and cell phone.  But if you hire a contractor like this, you’ll have no way to track the contractor down if he takes your money and runs.
9. 9. No proof of insurance. Regulations vary from state to state, but in general contractors need to be insured and licensed to work on a home. Unlicensed contractors might offer you a cut-rate deal on a renovation, but they can leave you exposed if something goes wrong.  If an injury occurs during the job, or the works cause damage to a neighbor’s home, you could be on the hook for damages.  So make sure to see a contractor’s paperwork before you sign a contract.
10. 10. No contract, or an open-ended contract.  Beware of any contractor that does business with a handshake or gives you a contract that’s overly open-ended.  A good contractor should know how long certain stages of the job will take and set deadlines that he can meet despite inevitable delays (i.e. materials delayed, bad weather).  The agreement you sign should also specify what kind of materials the contractor will use.  Home renovations are complex and every stage of the renovation should be documented in the contract.  You want to protect yourself against a contractor that promises you the moon and then cuts cost with bargain-basement materials.

8 Questions to Ask a Prospective Contractor

1. 1. How long have you been a contractor?  HINT: Check the license.
2. 2. Do you do the majority of the work yourself, have employees or subcontract out?  HINT: If it’s a big job and they’re a one man show you can expect things to take a lot longer. If they have employees that is better.
3. 3. What is your timeline for completing this job?  HINT: Don’t leave anything open-ended.  Get it in writing.
4. 4. How will additional charges be dealt with?  HINT: Experts warns to expect an increase of 10 to 15 percent on top of the proposal – more if your project includes hidden problems.
5. 5. Do you offer any warranties on your work?  HINT: Ask for details and proof of warranty.
6. 6. What will this project cost?  HINT: Always ask for a detailed, written bid that is to be accepted in writing.
7. 7. What is the deposit for this project?  HINT: For most jobs a down-payment of around 15% is common.  As a general rule, an initial payment should never exceed a third of the total project cost.
8. 8. Will you be pulling permits for this project?  HINT: Some projects may not require permits, others may not. I suggest doing your own research first, and then asking them. Permits may take longer, but having a city or county inspect the work reduces your risk of it being done wrong.
   

   Other Need-to-Knows When Your Hire a Contractor
   

• »  Get a few bids before you hire a contractor.
• »  Provide timely response to questions or issues.
• »  You get what you pay for. Sometimes the lowest bid was the lowest for a reason.
• »  Review all aspects of a contract before you sign.
• »  Even if you hire the best contractor, someone will still need to check up on them.
• »  Inspect what you expect. If you are not happy with the work say something.
• »  Schedule a time once a week to check in on-site, or have someone visit the property for you.
• »  NEVER let a non-licensed person (or tenant) do work on your properties!
• »  Let them know that you plan on sending them more business after the first project.

Where Can You Find a Good Contractor?

Now that you’ve learned how to spot a shady contractor, you need a way to find the good guys.  Here are a few ways to find the best contractors:

1. »  Referrals from customers & subcontractors
2. »  Referrals from Agent & Property Manager
3. »  Online reviews – Yelp & Google
4. »  Home Improvement Sites – Angie’ List, Houzz, Porch, Thumbtack

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