Hiring A Contractor
Once you’ve narrowed your options, get written estimates from several firms. Don’t automatically choose the lowest bidder. Ask for an explanation to see if there’s a reason for the difference in price.
In order to make a sound choice, there are some key questions you should pose to potential contractors — ideally at least three candidates so you can compare their responses — to ensure you’re getting a good match. This is your home, after all; you want someone who’s dependable and determined to see the project through to the end.
What’s your business history?
When you’re first getting into the process of hiring a contractor, you’ll want to dig deep to get an idea of his or her business history. This means requesting — and duly verifying — proof that he or she is currently state licensed in your area, if applicable in your area. Rules vary by state, so if you live in the U.S. try to find out whether your contractor needs to be licensed or registered to work on your project.
Other items to check up on include paying employees legally and carrying workers’ compensation, property damage and liability insurance. Membership with a reputable professional association is also a good sign. On a similar note, find out if the contractor has ever declared bankruptcy or if anyone’s ever taken legal action against him or her. Get the specifics too, like how long he or she has been in business and under what names. You should also find out how a contractor’s business is structured and where it’s physically based.
It’s important to confirm whether the contractor has any recent, relevant experience, so get a list of references who have had projects similar in scope to yours and follow up with them. Don’t be shy about making phone calls and visits. Ask other customers questions about their experiences dealing with the contractor and their satisfaction with the finished product. You can obtain other third-party verifications from state licensing bodies, professional associations, state and local courts, insurance providers, suppliers, Better Business Bureaus and municipal departments.
Once you’ve investigated and compared contractors’ histories and qualifications, find out more about their business practices by asking them the questions on the next page.
How many projects like mine have you completed in the last year?
Ask for a list so you can see how familiar the contractor is with your type of project.
May I have a list of references?
A contractor should be able to give you names, addresses, and phone numbers of at least three clients with projects like yours. Ask each client how long ago the project was and whether it was completed on time. Was the client satisfied? Were there any unexpected costs? Did workers show up on time and clean up after finishing the job? You also could tell the contractor that you’d like to visit jobs in progress.
Ask what work will be done by the contractor’s employees and what work will be done by subcontractors.
Asking for an employee list to make sure the contractor really has the employees he says he does and won’t be using casual labor hired off the street could be important.
It’s important to ascertain during the course of the interview how the contractor plans on handling site supervision and subcontractors for starters, a lot of the questions on the last page (such as those concerning licensing, payroll, liability insurance and workers’ comp) are inquiries you’ll need to put to any subcontractors as well — everyone on-site must be fully covered.
Another reason it’s a good idea to find out whether the contractor has a work crew or intends to roll out a whole series of subcontractors? To obtain records of all the transactions between everyone to save yourself from getting burned if the contractor doesn’t pony up. In some states, a mechanic’s lien can be placed on your home if subcontractors don’t get paid, and they can sue you in court for compensation [source: FTC. You can protect yourself by asking the contractor, subcontractors and suppliers for lien releases or waivers upon each payment.
Further key questions center on work-site presence. How much time does the contractor propose to spend on your project each week, and how many other jobs is he or she completing in tandem to yours? Does the contractor plan on doing any of the actual labor, or is he or she mainly performing in a supervisory role? How often will the contractor be on-site, and who’ll be supervising during times when he or she isn’t there? A trustworthy and accountable presence should be on hand at all times.
When consulting the references, feel free to ask them about the workers’ behavior. Did they clean up after themselves? Were they on time? And speaking of being on time — we’ll consider the project’s timeline on the next page.
Interview at least three contractors.
Ask a lot of questions and get a written bid from each one. When you compare bids, make sure each one includes the same materials and the same tasks, so you’re comparing apples and apples. Get three bids even if you have a contractor you like because you’ll learn something from each interview. “Don’t be afraid to negotiate,” Hicks says. While you might do some haggling at the interview, be prepared to do most of the negotiation after you get the bid and before you sign the contract.
What types of insurance do you carry?
Contractors should have:
- personal liability
- worker’s compensation
- property damage coverage
Ask for copies of insurance certificates, and make sure they’re current, or you could be held liable for any injuries and damages that occur during the project.
How long is my project going to take?
Before you hire a contractor, you should ask if he or she can provide you with a fixed start date and a completion date — including any cleanup duties. These dates should be included in the formal written agreement, along with a timetable of the work that’ll be done and a material list of everything that’ll be needed. It’s also smart to address how change orders will affect the project’s timeline in the contract (more details on that later).
During the project (provided you aren’t watching it unfold firsthand), you’ll probably want to check in once in a while to see how everything’s coming along. So it’s a good idea to ask the contractor how he or she plans on keeping you up-to-date and the process for scheduling site visits. Another related concern is determining the best way to stay in contact with the contractor so you can communicate any questions or concerns to him or her.
Without proper communication — and documentation — your project might go from being a dream come true to a disaster, so on the next page, we’ll check out another set of questions you’ll need to clear with a contractor before you hire him or her.
Will you be using subcontractors on this project?
If so, make sure the subcontractors have current insurance coverage and licenses, too, if required.
To find builders, remodelers, and related providers in your area that are members of the National Association of Home Builders, visit nahb.org. To find detailed information about a builder, service provider, or remodeler in your area.
Get a Written Contract
Contract requirements vary by state. Even if your state doesn’t require a written agreement, ask for one. It should be clear and concise and include the who, what, where, when, and cost of your project. Before you sign a contract, make sure it includes:
- the contractor’s name, address, phone, and license number (if required)
- an estimated start and completion date
- the payment schedule for the contractor, subcontractors, and suppliers
- the contractor’s obligation to get all necessary permits
- how change orders are handled. A change order is a written authorization to the contractor to make a change or addition to the work described in the original contract, and could affect the project’s cost and schedule.
- a detailed list of all materials including each product’s color, model, size, and brand. If some materials will be chosen later, the contract should say who’s responsible for choosing each item and how much money is budgeted for it (this is also known as the “allowance”).
- information about warranties covering materials and workmanship, with names and addresses of who is honoring them — the contractor, distributor, or manufacturer. The length of the warranty period and any limitations also should be spelled out.
- what the contractor will and won’t do. For example, is site clean-up and trash hauling included in the price? Ask for a “broom clause” that makes the contractor responsible for all clean-up work, including spills and stains.
- any promises made during conversations or calls. If they don’t remember, you may be out of luck — or charged extra.
- a written statement of your right to cancel the contract within three business days.
What’s your work routine like?
Communicating with your contractor about the specifics of your project can be difficult enough. Do you really want the puce countertops? Should the roof be that slanted? With so many details to keep in mind, remember that you’re going to have a person in or around your house for at least a few weeks (and perhaps months). And to them, your home is their workplace. So don’t hesitate to ask them what kind of a colleague they are.
Having an understanding and expectation of a contractor’s routine is vital to your own happiness. What time do they start working? Do they work until the project is finished, or will they be working on multiple projects at a time? It’s also a good idea to inquire about what they do with leftover or waste materials. Will there be piles of timber in your backyard until April?
It’s not unreasonable to ask the contractor beforehand if you have a schedule you’d like them to keep, and let them know that you’ll be expecting regular progress reports. Once you have that schedule, take advice from the next page and get it in writing.
Can I get that in writing?
Sure, you’re probably going to sign some sort of agreement that the contractor will work for a certain fee, but simply discussing a project at length is no guarantee of the kind of work you’ll end up with. In the contract, have the details of the project carefully spelled out. What dates will they start? How long will it take? What permits are required to be pulled? And what, exactly, are you looking for in the project?
There should be a clause for dealing with potential change orders, which allow for additional projects to be carried out at the homeowner’s or contractor’s behest. In addition, if you want to make sure that your home improvement professionals clean up after themselves when they’re done, be sure to include a broom clause in the contract, which legally requires them to do so.
It doesn’t hurt to put a liability release in writing and to make careful note of the materials that will be used, which will also allow you to see where your budget is being spent. And when it comes to budget, check out the next page for another important financial question for your contractor.
What do I have to put down?
Down payments are a tricky thing when it comes to renovation and home improvements. Sure, it’s certainly a sign of good faith for you to anchor your contractor with a bit of cash. But you also don’t want to foolishly place your money in the hands of someone who you can’t contact if, say, they never show up.
The Contractor’s State License Board of Canada recommends only a 10 percent down payment, or $1,000 (whichever is less). In addition, some U.S. state laws put a cap on the down payment amount that contractors can ask for [source: FTC. They also recommend not letting your payments get ahead of the work; that is, no paying for the roof over your head when you’re still relying on tarps to keep out the rain.
Remember that a stable company doesn’t need a large amount of money to pay for materials or overhead; they should have a healthy flow of cash that will allow them to safely start a project without a huge advance. It’s that concern that leads us to our next question: Who, exactly, are we paying when we pay our contractor?
So, who do I write this check to?
Although it seems obvious, remember that you don’t necessarily want to fork over funds to just anybody for the work they’ve provided. Paying a business — as opposed to an individual — usually provides some assurance that you’re on the books somewhere.
Paying an individual opens some serious loopholes. If the contractor has a business license yet they’re still asking for an individual check, it probably means that the contractor will not be reporting that income for taxes not exactly a sign of an honest worker. If they don’t have a business license, you’ve now opened a whole can of worms. Not only are they unlicensed, but you’re essentially putting yourself at liability for any badly done work (or worse, any injuries sustained by the workers).
In addition, you should never pay cash, which is impossible to track and is often requested by questionable contractors. Checks loan financing and credit cards are typically much safer options.
After You Hire a Contractor
Keep Records
Keep all paperwork related to your project in one place. This includes:
- copies of the contract
- change orders
- any correspondence with your home improvement professionals
- a record of all You may need receipts for tax purposes.
Keep a log or journal of all phone calls, conversations, and activities. You also might want to take photographs as the job progresses. These records are especially important if you have problems with your project — during or after construction.
Pay Wisely
Don’t make the final payment or sign an affidavit of final release until you’re satisfied.
Besides being satisfied with the work, you also need to know that subcontractors and suppliers have been paid. Laws in your state might allow them to file a mechanic’s lien against your home to satisfy their unpaid bills, forcing you to sell your home to pay them. Protect yourself by asking the contractor, and every subcontractor and supplier, for a lien release or lien waiver.
Know the limit for the final bill.
Some state or local laws limit the amount by which the final bill can exceed the estimate, unless you have approved the increase.
Know when you can withhold payment.
If you have a problem with merchandise or services charged to a credit card, and you’ve made a good faith effort to work out the problem with the seller, you have the right to contact your credit card company and withhold payment from the card issuer for the merchandise or services. You can withhold payment up to the amount of credit outstanding for the purchase, plus any finance or related charges.
Expect a contractor to be too busy to start right away. “The best folks are the busy ones,” says Cannon Christian, president of Renovation Realty in San Diego, which remodels homes before they’re sold.