How to find a contractor who won’t rip you off

Pay attention to the paperwork when you’re hiring a contractor for a home improvement.
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Four months into a kitchen remodel that was supposed to take three weeks, your contractor stops answering the phone. No one has shown up in days. You’ve already paid almost the full amount of money budgeted for the project, and you’re living in a cloud of dust and debris without a working stove.

It’s a more common scenario than homeowners might think.

“Contractors are like anything: There are some good ones and there are some bad ones, and you’re really just trying to mitigate your risk,” says Amir Gibbs, a Maryland attorney who specializes in construction litigation at the Gibbs Law Firm.

But it’s not always obvious how to mitigate risk — especially if you’ve never hired a general contractor before. Here are some factors to consider before you let anybody take a hammer to your walls.

Make sure their paperwork is in order

Let’s start with the basics: Every contractor you consider hiring should be licensed, insured and in good corporate standing with your state. This increases the chances that you’re working with a legitimate company and offers you additional recourse in some states in case things go wrong.

The first step in hiring a contractor is to make sure they are licensed, insured and in good standing in your state.
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It’s important to note that different states require different types of licenses, and different licenses are also required for certain kinds of work. This means you’ll have to do a little research. There are guides online that break down license requirements state by state, and most states have online portals where you can look up your contractor’s license status and check to see whether their business is in good standing.

Any contract you receive will probably have the contractor’s business name, license number and information about insurance, but “you don’t necessarily want to take their word for it,” Gibbs says. It’s reasonable to ask to see physical proof of insurance and to double-check their licenses with information from your state.

Research the contractor’s past work and reputation

Online reviews are, of course, the most obvious way to do this, and a company’s online reputation does matter, multiple lawyers say. But it shouldn’t be the end-all and be-all of your research.

“I don’t put that much stock in reviews,” says Peter Viteznik, a construction litigation attorney at Kilmer, Voorhees & Laurick in Oregon. “If I had friends hiring a contractor, I’m telling them to call three recent references.”

Gibbs emphasizes that you should call references with a list of specific questions. “Ask about the quality of the work, find out about the homeowner’s experience working with the contractor. Did the project remain on budget? Did they complete the project on time? Did they have any disputes, and if so, how were they resolved?”

Gibbs also says to make sure the references provided cover projects similar to what you want done — in other words, make sure you’re comparing apples to apples.

“All builds aren’t the same. You don’t want them to gain their experience with you,” he says. “Somebody has to be number one, but it doesn’t have to be you.”

Look for lawsuits

Even more than online reviews and references, a company’s history of lawsuits can be enlightening.

In most places, you can look up the company or owner’s name in your local courts’ public case search online. If the court electronically files documents, you may even be able to read the specifics of the suits. (Often, companies are operating in more than one jurisdiction, so do some research and look them up in as many as feels reasonable to you).

States will also have regulatory bodies that you can call to ask questions about any claims or lawsuits; Maryland, for example, has the Home Improvement Commission, and Oregon has the Construction Contractors Board.

“I would also tell you to contact consumer affairs at the county level and state level to see if you can get any information from them,” says Andrew Cole, a principal at Stein Sperling in Maryland who specializes in construction litigation.

A single claim or lawsuit doesn’t necessarily mean you should blacklist a company, Gibbs says, but it’s something you can inquire about further with the contractor.

Read the contract

Even after you’ve done your due diligence and decided to hire someone, the vetting isn’t quite done.

First of all, make sure there’s a signed contract in place before anybody starts working on your home. “Sometimes people engage contractors on a handshake or some sort of invoice that’s going to be pretty scant in detail,” Gibbs says.

Then, read the entire contract, top to bottom. The most crucial thing to have in writing is an agreed upon payment schedule, multiple lawyers say. What deposit are you expected to put down for the work, when is payment due, and at what intervals of the project? Viteznik stresses that you should never have paid the contractor more of the total price than the percentage of the project they’ve completed.

“If you get into a dispute the first thing I ask is, ‘OK, how much have you paid?’” Viteznik says. “Most people say, ‘It’s a $50,000 kitchen remodel and they’re 10 percent done and I’ve paid $60,000 because there was a change order.’”

Something else to have in writing: The agreed-upon timeline for the project, broken down week-by-week.

Cole of Stein Sperling also suggests homeowners read carefully about the dispute resolution process in the contract, in case anything goes wrong. Some contracts give homeowners only a limited window of time after work is complete to notify the contractor about problems; others require that disputes be resolved via arbitration rather than in court. Cole says he’s also seen contracts that say the homeowner’s final payment functions as a kind of waiver of any further claims about issues with the work. It’s important to be aware of exactly what the contract requires, and if there’s anything in the contract (or not in the contract) that makes you uncomfortable, negotiate a change in the language, Cole and other lawyers say.

And remember to take a look at the warranty policy — about a year or two is standard, and no warranty is “not great,” says Gibbs.

If you’re hiring for a significant project costing tens of thousands of dollars, it might be smart to hire a lawyer to look over the contract for you. “Lawyers cost too much, I know,” Viteznik says. But for significant transactions, he says it’s worth paying for a couple hours of a lawyer’s time.

Know your subcontractors

Contractors will usually engage with subs for certain parts of the project such as carpentry, electrical or plumbing. You should inquire with your contractor about who the subcontractors are and ask what kind of relationship the company has with that specific sub (long-standing relationships with experienced, licensed subs are best).

Also, you should always be absolutely sure that when you pay the contractor, the contractor is paying the subs for their work. If they don’t, you’ll be responsible for it.

“The fact that you paid the contractor doesn’t get you off,” says Viteznik. “You still owe the subs, and you may have to pay twice.”

Subcontractors who don’t get paid could put a lien on your home, so it’s important to make sure the contractor you engage is trustworthy. When you pay your contractor, they should give you a lien waiver that states they’re paying the subs and the subs waive the right to put a lien on your home, Cole says. “If you can’t get that, you should at least confirm payment by email with the sub,” he says.

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