Helpful Tips on Selecting the Right Contractor

Selecting a reliable contractor can be a difficult and time-consuming task, due to the fact the industry has a variety of terms, cost, availability, a specialist in trade, knowledge, quality, and professionalism. Most licensed contractors are competent, honest, and financially responsible; however, like all businesses, contractors are in the business to make money. To avoid having problems with the property, go for a contractor that's backed by a credible institution. Fly-by-night contractors must be avoided, making those referred by neighbors and friends a very ideal prospect.

First, do you know what type of contractor you are looking for in your project? Check out this list of contactor types for your project.

Below are some bullet points with brief descriptions of things to take into consideration while selecting a contractor.

Please use these laws and notes as guidelines. These laws are based on the Contractor State Licensing Board of California. The laws may vary from state to state, as well as counties and other jurisdictions and the years.

Get at least 3 estimates or bids.

Taking the time to get at least 3 estimates on each repair is an important key in potential savings. The level of work and supplies used with each contractor could vary drastically in an estimate. An important tip is to compare the bids by taking into consideration the level of detail done by each contractor and the quality of the craftsmanship and supplies used (name brand appliances and other high quality variables). Be wary of unusually low estimates. "If the offer sounds too good to be true, it probably is!" Consider the option of using a free home contractor referral service to ensure your choice is right for you. {top}

Consider your options with obtaining financing for your larger projects.

For your larger projects, you may wish to obtain financing through a personal loan, a home equity loan, a bank or credit union, or a savings and loan. As important as getting 3 estimates with a contractor, you should shop around for your funding. Your contractor may be able to help you secure financing. Lending institutions may offer Federal Housing Administration (FHA) loans. Beware of anyone who tells you that the FHA approves the contractor's work or endorses the contractor. FHA does not guarantee the work done by any contractor. {top}

SEE the contractor's license, and verify insurance.

Always review a copy of the contractor's pocket license, and some other form of identification. The name on the license should be the same as the name of the contractor or the business name that is contracting the work. You can also, call State Licensing Boards in your state to verify that the license is valid. A valid California Contractor's License is required for projects estimated at $300 or more. {top}

How do you verify the contractor's license?

License status information can be accessed from State Licensing Boards. The available information may not reflect any civil or criminal judgments or actions that have not been reported to the Licensing Boards.

For repairs due to claims on your insurance, verify with your insurance company.

If your project is the result of damages covered by your insurance, it is critical to check with your insurance company to determine the extent of the coverage before signing any contract. {top}

Check local references.

Even though this service is a referral service, it's also good to ask the contractors for their references. Verify that previous customers have been satisfied with the work done, and if it was done on a timely basis at the agreed contract rate. Also, if any changes did arise, was the contractor willing to make any necessary corrections. If possible, obtain references from material suppliers, and financial institutions to determine whether the contractor is financially responsible and has shown integrity in the industry. Another valuable source of reference is the local building permit offices. {top}

Other questions to ask:

1. What is the projected start date and finish date? What about weather delays?
2. Who will be the supervisor in charge of the project?
3. How many projects has the supervisor done before like this project?
4. Do you feel comfortable allowing this person into your home?
5. What will happen with the project debris? 
6. What inconveniences to prepare for, like no water or electricity? How long would they be turned off? {top}

For larger projects, check the status of the contractor's bond.

Bonding is required for larger jobs financed by lenders, contractors, or owners. Some bonds are designed to protect you against substandard work that does not comply with local building codes. Bonds are not to assure the financial or professional integrity of a contractor. Bonds can be obtained from bonding companies for a percentage of the contract price. Remember to recognize the bond fee as a cost of the project. Bonds may be classified as:

Contractor's License Bond - A bond with a surety company or cash deposit of $7,500 with the State is required of all licensed contractors in California.

Performance Bonds - A bond that guarantees the project's completion according to the building plans and specifications.

Payment Bonds - A bond that assures the owner that no liens for labor and material will be filed against the property.

Contractor Bonds - A bond that guarantees both job completion and payment of all labor and material. {top}

Verify that the contractor has workers' compensation and liability insurance.

California law requires contractors with employees to have workers' compensation insurance for property damage and personal liability insurance. If a worker is injured working on your property and the contractor does not have insurance, you as the homeowner, are responsible for any medical needs. Don't allow your homeowner's insurance policy to become your contractor's liability coverage. {top}

Be specific of your requirements in a written contract.

Spec out all the repairs you want to be done in a detailed written contract. Be very specific of your needs and to what degree of quality you are budgeted for on the improvements. Quality, quantity, weight, color, size, and name brands should be clearly stated in the contract. Obtain accurate plans or blueprints. Approve the plans before work is started. A written contract is highly recommended. ONLY sign a contract if you fully understand all aspects of the contract. Keep a copy of the contract for your records.

Ask questions!! An essential key to a successful relationship with your contractor and a successful project is communication. Over communicate if necessary to ensure you get the results you desire. If any changes arise, agree in advance that these changes must be approved before the charges occur in writing. Agree that both the contractor and you sign the revision/amendment to the contract. Allow extra time for the project for any unforeseen changes.

Don't forget to include in the contract storage of materials and debris, as well as cleanup and removal of debris and materials, or any special requests to save unused material or old appliances.

Keep records of everything that pertains to the job! Include pictures of progress, any letters or notes, a contract including changes, invoices and bills, and canceled checks. {top}

Three-day cancellation period for a signed contract option.

The law requires a contractor to give you a written notice of your right to cancel a contract within 3 days of signing it, provided that it was solicited at someplace other than the contractor's place of business or appropriate trade premised such as your home. If you choose to cancel the contract, do this in writing by registered mail and also call the contractor. After the contract is canceled, you may sign another one with the same contractor or a different one if you prefer. {top}

Get warranties in writing on the contact.

The contract should also state the warranties for the labor and materials including the duration of the warranty. You should also request the warranties offered by the manufacturers of the materials or appliances installed. {top}

Consider the potential of liens.

Again, for your larger projects, you should protect yourself from liens against your home in the event a contact does not pay subcontractors or suppliers. Local laws vary, but you may be able to add a release-of-lien clause to your contact. Another option is an escrow account. Refer to our finance tips for more information. {top}

Preliminary lien notices.

You may receive a preliminary lien notice from a subcontractor or material supplier. This does not mean that a lien has been filed against your property. The law requires you to be furnished with these notices to alert you that subcontractors or material suppliers may have lien rights. {top}

Energy efficiency must be a consideration with new and remodeled buildings.

California law requires new and remodeled buildings to meet or exceed certain energy efficiency standards. Some financial agencies offer lower-interest loans for remodeling. Utility companies, such as Pacific Gas and Electric Company (PG&E), offer rebates on the purchase of energy-efficient appliances. You may call PG&E's SmarterEnergy Line at 1 800 933 9555 or visit their website. Also, leading institutions may offer energy-efficient mortgages. Additional information on California's energy-efficient standards is available from the Energy Standards Hotline at (800) 772-3300 or (916) 654-5106. {top}

Obtain building permits.

Construction of new homes and many home improvements require building permits from the local building department. Usually, contractors obtain these permits because they know permits are required. Ultimately it's the owner's responsibility for making sure the required permits are obtained, and that the final inspection is done when the work is completed. A good way to ensure this is done is by including this in the contract. Refer to our listing of building permit departments for your city. {top}

Pay in installments.

Depending on the work required, contractors are entitled to a sizable down payment. California law required that the amount of the down payment for any home improvement contact (except for swimming pools) may not exceed $1,000 or 10 percent of the contract price (excluding finance charges), whichever is less. Swimming pool down payments shall not exceed $200 or 2 percent of the contract price (excluding finance charges), whichever is less.

The initial installment should cover the contractor to have enough money to buy the materials to finish the work, and also allow the owner to have enough money left on the last installment to ensure the finish date has a satisfactory completion. For larger projects, escrow accounts are available at a bank. Refer to our finance tips for more information. {top}

Mechanic's Liens

If you do hire a general contractor, be aware that a subcontractor or supplier could file a "Claim of Lien" or "Mechanic's Lien" against your home even if you paid the contractor. Potentially you could pay the bill twice to avoid a foreclosure proceeding. Do not allow construction to start until your contractor gives you a copy of the Information Notice to the Owner about Construction Liens. {top}

Hire a general contractor for larger improvements like additions or kitchen remodeling.

If the work requires more than two specialty contractors, you should hire a registered general contractor. (Remodeling a kitchen, for example, usually requires a plumber, electrician, and carpenter.) This is not required, but it's highly recommended if you do not have the time and the skills to cover the task thoroughly. This job includes the responsibilities of state and federal taxes, workers' compensation, and other legal liabilities, and you are to assume responsibility for the overall job (not the person you hire). Do your homework before jumping into an unknown arena, it is best to leave these matters to your licensed general contractor. {top}

Arbitration clause.

A contractor may have an arbitration clause to settle disputes in the contract. This clause could enable you to resolve disputes more quickly and enforce your warranty without litigation. Small claims court and advice from an attorney should be considered before arbitration for larger sums of money. {top}