Total Financial Makeover
Everything You Need to Know when Hiring a Contractor
May, 2006 - Issue #19
It's that time of year again: flowers are blooming, birds are singing and contractor scammers are out in force. We all have a list of things we would like done to our homes to improve them in one way or another. So how do you sift your way through all the contractors out there to find the right one? I'd like to tell you that all contractors are good at heart and only focused on improving your home, but unfortunately that is not the case.

Your contractor might be a scammer if he/she: solicits door-to-door; offers you a break on materials from another job; accepts cash only; needs a commitment or decision today; pushes you to sign a contract now; isn't listed in the phonebook; doesn't provide or can't verify references and credentials; offers to give you a discount if you find him other customers; wants you to pay for the entire job up front; offers an unusually long guarantee; wants you to get the building permits.

"Under state law, when undertaking a home improvement or repair job, contractors cannot ask for a deposit of more than 10 percent of the total cost of the job or $1,000, whichever is less."
Choose a contractor the same way you would choose a doctor or a financial planner. Do a little research. Ask your friends and family to provide a list of contractors they have had good experiences with in the past. Once you have three or more contractors you are interested in working with, check their backgrounds.

You would never want to hire a contractor who isn't licensed. Ask the bidding contractor to provide his name, license number and business address. Verify this information with the Contractors State License Board by calling them at 1-800-321-CSLB (2752), or log onto After verifying the contractor's information, you would want to ask him for at least three references to review his past work. Contact the Better Business Bureau and ask how long the contractor has been in business and whether any complaints have been filed against the contractor.

At this point you may not be completely sold on working with this contractor due to his pricing or for any other reason. To check the consistency of a contractor's pricing, you should get at least three separate bids. There are also a number of sources out there to help you arrive at an accurate budget for your remodeling project. Check or to help you calculate the cost of labor and materials based on the size of your job.

You should never pay for any materials up front. When it comes to paying for the actual work done, you shouldn't let your payments get ahead of the work completed, and you should never pay for the full cost of a job up front. Would you pay for a repair on your car before the work had been done? When a contractor asks for a deposit up front, how much is the right amount? Under state law, when undertaking a home improvement or repair job, contractors cannot ask for a deposit of more than 10 percent of the total cost of the job or $1,000, whichever is less.

Your home is probably the greatest asset you will own. This is why you must hire a contractor who is insured against workers' compensations, property damage and personal liability. If an accident occurs on your property and your contractor is not insured, you are the one who is not protected. Be persistent; don't just take the contractor's word that he/she is insured. Ask for proof of coverage, and then call the insurance carrier to verify that the coverage is up to date.

A written contract is essential for your protection, as well as the contractor's. Read the contract carefully and ask questions about any clause that is unclear. The description of the remodeling job should detail all the materials to be used and include everything the contractor will and will not do.

Check for the total cost of the remodeling project and an agreed-upon payment schedule. The Better Business Bureau recommends that you request a release-of-lien clause to protect you from liens against your home if the primary contractor fails to pay subcontractors and suppliers. Any product warranties and workmanship guarantees need to be clearly spelled out. Ask whether there is a cancellation policy, when it would kick in, and for how much.

Finally, never sign an incomplete contract and keep a copy of the signed and dated contract on file.


Jeff Springgate is a financial advisor at Total Financial Solutions. He also co-hosts a financial radio show on KHTS AM 1220 on Tuesdays and Thursdays from 1 p.m. to 2 p.m.
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