A recent newspaper article spelled out the problems a homeowner may face if they are not careful. “Local remodel contractor files bankruptcy leaving homeowners holding the bag”. This happens too often. I have seen it many times. There is no way tell if a contractor is about to go out of business, but there are steps you can take to minimize the potential problems.
First thing is the interview. Try to get referrals from your friends or family. Call three to five contractors of the referrals or try yellow pages. See how promptly they respond. Set up an appointment and see which contractors show up and who’s on time. During the interview ask probing questions. Use your own intuition about the person. Let your judgment of character work for you. If you feel they are honest, trust your instincts. Try to define the scope of your project in the same way for each contractor to make sure they are bidding the same job.
Remember, you will have this person, their employees, and sub-contractors in your house for some time. Ask for references! These should include a variety of jobs, both in progress and completed. You can ask for vendor references as well.
After you meet, call the Contractor’s State License Board (800-321 CSLB) or go their website (www.cslb.ca.gov) to check out the status of the license and bond. Call the Better Business Bureau (858-496-2131) to check for complaints. Again, trust your own judgment, but always check everything you can.
Once you choose a contractor, there are some things you can do to protect yourself during the job. Make sure the contract is detailed. It should describe all phases of the job and include all the information on the products being used. Before signing, allowances should be set on items such as sinks, toilets, faucets, and floor coverings. The more detailed the contract the less there is to disagree about once the work is under way.
The contract should spell out the payment terms in detail. State law says a contractor cannot take more than 10% (up to a maximum of $1000) as a down payment. For example, a job with a total contract price of $8,000 requires a down payment of no more than $800. The remaining payments should be progress payments tied to progress on the project. As an example, payments on a $50,000 room addition would be $1000 down, $10% at foundation, 10% at framing, 10% at roofing, 10% at drywall and so on.
The idea is to always have enough money left to finish the project if the contractor disappears. If a contractor tells you he needs money up front to pay for material, I would wonder why he has no credit accounts with his suppliers. If his suppliers want cash, that could be an indication of a financial problem. Remember the golden rule: “He who has the gold, makes the rules.” When you give up the money you give up the power. Don’t give up the power until you are happy. Another good idea is to get lien releases from all the subcontractors and suppliers on your project.
There are many reputable, reliable, honest contractors out there. Don’t let the horror stories discourage you. That is only a small percentage of the construction industry. If you do your homework, you will probably have a good experience.