5 Things to Look for When Hiring a Contractor

Know what to ask before putting money into a home renovation.

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It’s spring, which means for many of us, it feels like it's time for some remodeling—perhaps a sprucing up of the kitchen or an upgrade on the bathroom. We’re not alone with our desire to renovate—homeowners who have put off small projects are now feeling more confident about the economy and beginning to spend more freely.

The industry is also starting to benefit from the rehabilitation of foreclosed properties (we’re on track for a projected 1.2 million foreclosures this year alone—a record high). As a result, spending on remodeling could rise 4 to 6 percent this year, according to Harvard University’s Joint Center for Housing Studies.

But before you jump on the renovation bandwagon, here are a few things you need to know about choosing a contractor.

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Check credentials and disciplinary history

Here’s what you should look for: A contractor who has been in business for a while, someone who is licensed and registered (every state has different rules; check yours on contractors-license.org or ask your local building inspector), has insurance (liability; worker’s comp), and has a solid reputation. Make sure that they also have a clean bill of health from the Better Business Bureau and from your state’s consumer protection agency.

Get bids

Once you’ve talked to friends, family, and neighbors (asking them if their contractor showed up—and finished—on time? And if there were any unexpected costs) as well as separated the good from the bad, get bids from your top three choices, tossing the lowball offer. While we’re all looking for value, be wary if someone comes in several thousand dollars below the others. Yes, it appears to be a great deal, but the contractor is most likely cutting corners somewhere, (perhaps using cheaper materials), or may start the project only to tell you down the line that it’s more complicated than initially assumed, and therefore more expensive. Be cheap but don't invite trouble.

Think beyond price

You’re going to be spending a lot of time with this contractor, so when you make your decision, think about whether you feel comfortable with their personality, background, methods, and communication skills. Is everyone clear about the project at hand—everyone on the same page? If not, you could end up disappointed, frustrated, and possibly out several thousand dollars beyond what you budgeted for.

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Contract, contract, contract

Every project should have a contract, no matter the size of the estimated work. Every detail about the project should be included in this contract — from a work timetable, (start and finish dates), to description of the work, to materials that will be used—right down to the brand or make of the fixtures—to the payment schedule and everything in between, including a time limit for fixing defects. Contracts ensure that if a dispute arises, it can be dealt with in a timely manner.

How you pay a contractor is as important as how much

Don’t pay a contractor more than 30 percent upfront. Make periodic payments as the contractor completes certain portions of the project, expecting to make an average of three payments per project, and dangling a significant amount—at least 10 percent—to be paid only when the job is completed to your satisfaction. This is the best way to ensure that the work gets done when and how you want it.

Vera Gibbons is a guest real estate contributor to the Zillow Blog, a resource for real estate and mortgage news. Twitter: @zillow.