Always make sure the company you are considering is properly licensed. Also, remember that anyone can say they are licensed, make them prove it with a copy of it, check the expiration dates, you can call the issuing authority and verify their licensing is in good standing.
What are the risks? Generally contractors without licenses don't have them for a reason, which is a huge red flag. Licensing requires passing written tests on codes and building practices, experience requirements and many other aspects that prove you are competent at what you are doing. If somebody isn't licensed there is probably a really bad reason why not.
Make sure the company you are considering carries general liability insurance. This is the insurance that protects your home from damage or negligence of the contractor, his employees or any sub-contractors he hires and brings on your property. A one million dollar policy is the standard of the industry. Also, remember that anyone can say they are insured, make them prove it with a copy of his insurance certificate, check the expiration dates, you can call the issuing authority and verify their insurance is in force.
What are the risks? If something goes wrong you have three choices, (1) to pay for the damages and repairs out of your own pocket. (2) to go after the contractor for the costs, which means suing him. Which of course is the where the real problem starts. If a contractor can't afford to carry insurance what are the chances that he has anything to sue him for? You can get a nice judgment of $50,000 against him, but how do you collect it from a guy that does everything illegally anyways and doesn't have anything of value? (3) you will have to ask your homeowners policy to cover it. There is no guarantee of course that they will cover the loss. Insurance companies do their best to protect themselves by having verbiage in their contract with you that might require you to only hire licensed contractors and prove the work has been properly permitted. Contractors without insurance usually don't follow many of the other rules that insurance companies usually require either.
Make sure they carry workers compensation insurance. It protects you from liability if a worker is injured while on your property. Be aware that if the contractor doesn’t carry workers’ compensation coverage, you will be liable for any injuries suffered by the contractor or any of his employees on your property.
If the contractor is a one-man operation, he can be exempt from having to carry workers’ compensation insurance. Ask him to show you his certificate of exemption from workers’ compensation. This is very risky for you thought. If he shows up with a helper and the helper gets hurt, with no workers’ compensation insurance, you may have to pay the medical bills. If the uninsured contractor is sloppy about verifying his sub-contractors workers compensation insurance and the sub-contractor gets hurt, again you may have to pay the medical bills.
What are the risks? Basically if anyone gets hurt while working on your home and they aren't covered by having workers comprehensive insurance coverage, you will be responsible by law for their medical treatments, which can be as simple as a few thousand dollars for a minor injury to hundreds or thousands for a major one.
Bottom line - It is always safer to deal with a fully insured contractor.
This is one of the most forgotten questions for customers. You wouldn't buy a car without a warranty would you? Ask about the warranty and ask if it is in writing. Never accept a verbal warranty of "If something breaks, don't worry, I'll fix it." a verbal warranty will be worth the paper it is printed on. Always insist on a warranty in writing. The warranty should clearly spell out what is covered and what is not and how long the warranty is good for.
What are the risks? It's pretty simple; with nothing in writing you have no warranty. The moment the contractor cashes your final payment you have nothing to protect you from poor workmanship or an innocent defect.
A good contractor will be happy to provide you with dozens of written references. One of the best ways to gage a company’s abilities is by talking to their past customers. Ask them how well the company met their promises, did they deliver on time, and most importantly would you hire them again or recommend them to others? Ask them what they like the most about working with them and what they could have improved upon.
What are the risks? Basically you are entering blindly into a relationship with someone on nothing but blind trust and hope. Most people operate in a pattern of repetition. Hopefully you got lucky and the person you hired will be one of the contractors who does competent work.
Your contractor should have no problem providing you with a written lien waiver at the end of the job. This is a legal document which say’s you have paid the contractor in full for the services rendered by the contract and the contractor waives his right to place a mechanics lien on your property. A good general contractor will also provide you with lien releases from any sub-contractors that do work on your project such as electricians or plumbers. This protects you in case the contractor doesn’t pay his sub-contractors after you have paid him in full. Without a lien release from the sub-contractors you will be liable for paying them. This amounts to you paying them twice!
What are the risks? Paying for the work twice. The lien laws favor anyone working on your home and not you. A general contractor can sub-contract work to anyone they choose and not pay them for that work and that sub-contractor can hold you responsible for paying them, no matter if you paid the general contractor already or not.
Make sure the contractor himself or one of the high-level foreman/lead carpenters is on the job daily whenever work is being performed – especially when sub-contractors are being used. The responsible party must be intimately familiar with all aspects of your project. Remember, if you won’t be home during the construction you will be leaving your house unlocked, or leaving a key with the contractor, you must feel comfortable. You can’t be worried about what is going on when you are not home.
What are the risks? The risks are many and varied, basically you are hiring the general contractor who you have met and has established a level of trust with you. However, many contractors are nothing but salesman, acquiring the job and selling it to someone else to complete. Someone who you have never met and have no control over choosing to do the work. Even if the contractor keeps the work in house, who is going to show up everyday? Will it be the contractor or his foreman with years of experience, or will it be unskilled and unsupervised workers?
Some contractors hate to pull building permits because they add costs to the project and they slow a project down. But is very important that your contractor pull all required permits, this is your only assurance that things will be done to code. Inspections put an independent 3rd party in your corner and offer you protection. Also most homeowner's insurance policies will only cover your home for work that is properly inspected.
Some contractors may ask you to get the permits. This is usually a warning sign that they are not able to pull the permit because they are unlicensed, or the work is outside of their license.
What are the risks? Your home is your biggest investment; you may be putting it unwillingly at risk as most homeowner's insurance policies have clauses that allow them to not pay claims coming about from illegally done work.
……We can't stress how important this information can be to you, ask questions such as how do they perform their work, what time do they start, how will you protect my carpets, how will the trash and debris be handled, do you work straight through a project? The answers to these questions will give you a clear picture of what type of contractor you are dealing with.
What are the risks? Maybe none or maybe you are in for a big surprise once work starts and you find yourself in a mess. Do yourself a favor and ask some specific questions so you can make an informed decision before you find it too late.
How many projects like mine have you completed in the last year?
Your contractor should have experience in the type of remodeling project you want done - not just "contracting experience". The more experience a contractor has and the more he specializes in the work you need done the better off you will be. Many contractors dabble in anything that comes their way and never develop expert expertise in what they are doing.
What are the risks? They could be huge and long-lasting. What can be a routine task for a company that is familiar with the work required in your project can be a real problem for one not familiar with it. This can lead to defective installations that don't show themselves until long after the work is done and sub-par quality. Everything is getting more and more complex in the world we live in, don't put yourself in the position of hiring somebody and paying them while they learn on the job.