Working with Contractors

If you decide to use a contractor, get names from friends, the Better Business Bureau, local hardware stores, or nonprofit housing groups. Call your county or city government and ask if it licenses home improvement contractors. Most people who make repairs are honest and fair. However, badly done or overpriced home repairs are common. Below are some suggestions for hiring a good contractor.

Important Note:
Contractors who try to get business by going door-to-door or calling on the phone may not be trustworthy. While some honest businesses do these things, others may be offering bad products or incomplete projects. Before doing business with such contractors, check their credentials. Never sign a contract under pressure.

Decide what kind of contractor you need. Contractors often are specialists such as electricians, bricklayers, and plumbers. Think about the type of project you want done and then choose the right kind of contractor.

Interview at least three contractors. Ask questions and take notes so you can compare answers later.

Get references, including the names and phone numbers of people each contractor has done work for that is like the job you want done. Call the references. Remember that contractors probably will not give you names of anyone except happy customers as references. Some questions to ask include:

How did you decide to use this contractor?
What work was done for you?
Did the workers keep the area neat and clean?
Was the work completed at the price stated in the contract?
Was the work completed on time?
Are you happy with the finished product?
Would you hire this contractor again?

Visit at least one job the contractor has finished. Inspect the quality of the work.

Ask how long the contractor has been in business. Also, make sure he or she is really in business. Check if they have letterhead stationery, a brochure, a business card, and a telephone number. Find out if the business is licensed and bonded in your state. Does your city or county have a licensing process for home improvement contractors? Ask if the contractor belongs to any professional trade groups. Get copies of any licenses and certifications.

Check the contractor's reputation. Call the local housing inspector, Better Business Bureau, home builders association, building trades council, and state and local consumer protection office to see if there are any complaints on file against the contractor.

Make sure the contractor has liability insurance. This includes worker's compensation, bodily or personal injury, and property damage. Ask the contractor for proof of current insurance and that the premiums have been paid. Write down the policy number and the insurance agent's name and phone number.

Ask what kind of guarantees the contractor gives. You want to make sure that the work is done right. Ask for a one-year warranty on parts and labor. New appliances have warranties from the manufacturer. All warranties and guarantees should be in writing.

Get firm, line-item bids from two or three contractors. Contractors will give you free estimates. Ask them to give you a firm bid on the project. Do not use contractors who will not give a firm bid. If a contractor says he can't know what problems he might find until he is actually doing the work, find another contractor. The bid should be in writing and be specific enough so that you can see what each item costs. This is called a line-item bid. Line-item bids let you compare what different contractors charge for each part of the job. When comparing contractors' estimates, be sure they use the same materials and base their bid on the same work.

Suppose two contractors each bid $450 to replace your dishwasher. How would you know which to choose? The first bids $125 for installation, $75 for removing the old dishwasher, and $250 to buy the new one. The second contractor bids $75 for installation and $25 to remove the old equipment and plans to install a better quality dishwasher costing $350. The line-item bid makes it easier to see what you are paying for.

Get contract specifics. For many jobs, the written estimate will be in a contract you can sign if you want to hire the contractor. Make sure you agree with the specifics. Do not sign a work agreement unless it says exactly what work is to be done. It should also state when and how payments are made and everything else you have discussed. Be sure the contract includes the date the work will start and what date it will be finished. The contract should say exactly how you will know whether work is done properly and what will happen if the work is not finished on time. Never sign a blank contract or one with blank spaces. Get a copy of your contract when you sign it. If you do not understand parts of the contract, have someone go over it with you.

Federal law gives you three days to cancel a contract for between $25 and $25,000 if you signed the contract somewhere other than the contractor's office. The contractor is required to tell you of these cancellation rights orally and in writing and give you two sets of forms for canceling. If you decide to cancel, do it by registered mail and keep one copy (as proof).

Control costs by controlling changes. Meet with your contractor to review your plans. If you change your design or specifications (such as the kind of building materials used) during the project, it will cost you more. Before the job begins, tell the contractor not to change anything you have agreed to without your written approval.

Agree on payment. It is best to agree that you will pay an exact amount that includes all costs for the project rather than an hourly rate. It is standard to make partial payments as the work is done. For example, if it costs $5,000 to remodel your kitchen, you might pay $1,000 when the linoleum is laid, another $2,000 when the cabinets are installed, and the rest, minus 10 percent (see below), when the major appliances are installed. Do not give the contractor any money before the work starts. If the contractor cannot afford to buy supplies and equipment, look for another contractor.

Important Note:
Contractors sometimes provide financing, but it is often at a much higher rate of interest than you will get from a bank credit union or savings and loan. Shop around for the best interest rate. Be sure you understand the terms of the loan and how you are to repay it.

Some homeowners may qualify for low-interest home improvement loans through nonprofit housing agencies or the city or county housing authority. Call these groups before you borrow.

Do not make the final payment until the work is finished. Include in your contract what amount is withheld as the final payment. Normally, the homeowner keeps back 10 percent of the total cost until the job is done.

Decide who is responsible for permits, licenses, and applications. If the work on your house requires building permits or inspections, your contractor should apply for the permits, though you may agree to pay the permit fees.

Get a lien waiver on big jobs that use subcontractors. Contractors often hire other contractors to do part of the work on big jobs. The contractor is responsible for paying these subcontractors. A lien waiver is a kind of receipt the contractor should give you when you make your first payment on the contract. The lien waiver protects you from paying for the same job twice if the contractor fails to pay subcontractors.

If a problem comes up with your contractor, try to work it out with him or her directly. If this does not work, contact the contractor's trade association. It may act as an intermediary or arrange arbitration. As a last resort, contact the Better Business Bureau or your state consumer protection office.