Although most contractors are honest and reputable, many are not. It therefore pays to be cautious when hiring a contractor. Ask friends and neighbors who have had work done on their homes for recommendations, and interview several contractors before you decide on the one you want.
Be sure to ask the contractors you interview for references from satisfied customers, and follow up on the information by talking to the customers themselves. Also, ask the contractor (or one of their customers) if you can see a recently completed job. Another client’s idea of a good job may not be the same as yours.
Make sure that the contractors you are considering have current and proper credentials.
Request a written bid from each contractor, and be sure that all the bids call for the same quality and kinds of construction materials. Each contractor who bids should do so with the same plans and information. That way, you will have a good means of comparison.
Have your agreement with the contractor put in writing and make sure it is as specific as possible. For major jobs, such as an addition to your home, the contract should be reviewed by your lawyer. At the minimum, the contract should describe the work to be done, the materials that will be used, the proposed completion date, the warranties provided on the work and the schedule for the contractor’s payment.
The payment schedule should specify that, when the job is done, you will withhold 10 to 20 percent of the final payment until the contractor has cleaned up the work area, you have written proof that you are no longer subject to mechanic’s liens from suppliers and subcontractors and you are assured that the job has been done right. In addition ask for a provision (called liquidated damages) in your agreement that penalizes the contractor if he misses the completion date by more than a week or two (if the contractor objects, you could also offer a bonus if the work is completed early). A good contract will also include a payment schedule. Typically this specifies three 30-percent lump payments at specified milestones with the final 10 percent held back until punch list items are completed. Do not pay anything more than token earnest money up front, if that. A successful contractor has adequate credit and cash flow to cover initial labor and materials. Sometimes, I even suggest the final payment be withheld for up to 30 days; this will give you time to “live” with the work and make sure that materials are functioning properly.
Insist that the contractor give you a list of the suppliers and subcontractors, such as plumbers and electricians, who will be working with them. Then you will know who can file a lien against your home if the contractor does not pay them. You should also ask for proof that the contractor is covered by worker’s compensation and liability insurance.
Since all jurisdictions require permits for remodeling work as well as for building jobs, your contract should require the contractor to obtain these permits and give you copies of them. If inspections are required, as they surely will be, you should also receive copies of the inspectors’ reports.