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Choosing the Wrong Contractor Can Be Costly

A contractor on a mound of dirt with bolt cutters.

We received a lot of calls from consumers where they hired contractors who either did a poor job or did not complete the job at all.  Hiring a contractor who hung crooked windows that leak, or who didn't buy half of the items you paid him to install, is not only a pain, it can be costly.  More and more, contractors are requiring large down payments before they begin their work.  The problem is the contractors who do a poor job, or no job at all, tend to be uncollectible.  That is, they spend that big down payment and there is nothing to return to the consumer.  Thus, we recommend consumers do their homework before they sign anything, and certainly before they give a contractor a large sum of money ($50,000 +) and risk losing it.  The following tips may help you protect yourself when choosing a contractor:

  1. Have a written contract.  When choosing a contractor, insist he provide you with a written contract.  Make sure the written contract specifies the scope of the contractor's work - what he will do, what he will install, how much materials will cost - and the total cost of the project.  If it's a larger project that will require draws (periodic payments), specify what milestones the contractor must meet in order for him to earn the release of those funds.  Also consider placing in there how long it will take for the contractor to complete the project, and what penalties, if any, he will face if he falls behind on the project, so he doesn't place another customer's project ahead of yours.
  2. Get the right size contractor for the job.  If you have a new construction, or a near-total rebuild (which is almost the same thing) it's a big job.  Choosing a contractor that consistently handles and delivers quality work on big jobs, as opposed to a handyman that only fixes leaky faucets, is imperative.  Consider whether the contractor has a physical headquarters - a brick-and-mortar building - and not just a post office box.  Also, check and see whether the contractor has a business, or will be doing everything in his own name.
  3. Get referrals and check them out.  When choosing a contractor, a professional should be able to provide the names and contact information for several former clients.  Don't accept the answer that "my client list is confidential."  No referrals is a red flag.  You should also contact these referrals to make sure they exist.  Ask if the contractor did the work, if he did it on time, and if he fixed any problem that arose along the way.  Did the contractor stay on budget, or was he constantly asking the homeowner for more money?  You can also search the potential contractor online to see if he's registered with the better business bureau (BBB) and whether he has any complaints against him (or his business).  Also check Yelp, Angie's List, and good old Google.  Here's an example of several persons scammed by the same contractor.
  4. Treat the search like you're interviewing someone for a job.  Because you are.  You are literally going to pay someone to perform a service, which means you're going to employ someone.  Think about the last job interview you had.  Did someone ask you a lot of questions?  Yes.  Did someone take a while to get back to you before making a final decision?  Yes.  Did that someone also interview multiple persons during the process to find the best candidate?  You bet.  When choosing a contractor, if the potential candidate doesn't like your questions, or can't answer your questions, he may not be the contractor for you.
  5. Set scheduled draws.  If your insurance company is involved, talk to your adjuster or claim representative about what amount the insurance company is willing to pay initially.  In one instance, a contractor asked for a down payment of 50%.  When the consumer told this to his insurance representative, the insurance representative said "no."  That's too high.  The contractor, the insurance representative, and the consumer later settled on a lesser amount for the initial payment.  After the initial payment, ensure the contractor has to prove he's met certain milestones in the construction before he gets paid any more money. 
  6. Require the issuance of two-party checks or joint checks.  It's a lot harder for a contractor to take the money and run when someone else has to sign off on a check too.  Joint checks, or two-party checks, can ensure that a contractor pays his subcontractors and the subcontractors pay their material suppliers.  This also helps prevent a subcontractor from filing a mechanic's lien on your property when someone higher up the food chain fails to pay him for his work.
  7. Ideally, have a performance bond in place.  We say "ideally" because these bonds are expensive and often used in government jobs to ensure that if the initial contractor does not complete the job, there is money available to hire a replacement contractor.  It may not be feasible to obtain one of these, especially for smaller jobs, but it's worth asking.
  8. Require a waiver of liens.  Finally, this goes hand-in-hand with scheduled draws.  You can require (yes, require, not request) your contractor sign a conditional waiver of liens, and require the same from his subcontractors (if he's using any).  Essentially, the contractor (or subcontractor) will agree that when he is paid a draw, he waives his right to file a mechanic's lien for labor or materials.  Again, this will help prevent the contractor (or subcontractor) from filing a mechanic's lien on your property.
  9. Make sure the contractor is licensed.  Most cities, counties, or states require contractors to obtain and maintain a license or register before doing work, depending upon the type of work.  Be wary if a contractor is not licensed, or if he's working under another person's license.  A large company may have a general license for its employees, but a solo contractor should be licensed in his own name or his own business' name, not in the name of a completely different person of whom you've never heard.  But, a license is not a guarantee that the contractor will do good work.  Most cities that require a license or registration only require the contractor to registers and pay a fee.  There is no proficiency test.  There isn't even a background check.  The license doesn't protect you, the homeowner, if things go badly.  It's just a way for the city to keep track of contractors working on projects.

If you have an issue with a contractor you hired to perform work on your home, contact us to see if we can help.


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