Tips on Hiring a Contractor

About

San Francisco Real Estate

Sellers

Buyers

San Francisco Real Estate News

TIC's / Condo Conversions

Resources

Real Estate Q&A

Tips on Hiring a Home Improvement Contractor

There are a number of steps which you should take before you sign a contract with a home improvement contractor.

Hire only licensed contractors. Particularly for larger projects. You can check a contractor's license number online at www.cslb.ca.gov or by calling 1-800-321-2752.
Get at least 3 bids. This may take some time, but is an important first step. Do not jump at the lowest bid; there are too many unscrupulous contractors who will purposely low-ball their bid, knowing full well that they will not be able to finish the job and break even -- let alone make a profit.
Check references. If a contractor gives you names of other homeowners for whom he worked, call them. Try to physically inspect the work that the contractor did for these other consumers. Keep in mind, however, that the contractor will only give you the names of friendly, happy customers.
Contact private and government agencies. Call the Better Business Bureau to determine if there have been any complaints against the prospective contractor.
Get a written contract, and don't sign anything until you completely understand the terms. If the job is large, do not sign a one or two page contract. The American Institute of Architects (AIA) has a number of good form contracts, and you should insist that your contractor use one of these forms. The AIA can be reached on the web at www.aia.org, or by phone at 800-AIA-3837.

There are a number of critical points which any home improvement contract must contain:

Start date and Date of Completion. Many homeowners will offer a bonus to a contractor for early completion, but will impose a daily late fee if the job is not completed by a date certain.
Payment schedule -- also known as a draw schedule. Your contract must spell out how the contractor will be paid. For example, at the beginning of the job, you will pay X percent (usually 10 or 15 percent of the total contract price). This will enable the contractor to buy the necessary materials so as to start working on your house. When a portion of the work has been completed (i.e. electrical) the contractor will get another check. A complete draw schedule is required for all home improvement contracts. DONT LET PAYMENTS GET AHEAD OF THEIR WORK.
Final payment upon Satisfaction of Job. A portion of the total contract (between 10%-15%) should be withheld until the work is completely finished and you are fully satisfied. Be sure to get receipts from the contractor to ensure that he has paid the subcontractors (i.e. the electriction, the plumber, etc...). In some cases, if the contractor does not pay his/her subcontractors, the subcontractors can put a lien on your home - despite you having fully paid the contractor!
Termination. The contract must contain language giving you the right to terminate the contract if the contractor is not performing. Generally, the homeowner will be required to send the contractor a letter, advising that if the work does not resume (or if certain items are not completed) by a date certain -- usually 10 or 15 days from the date of the letter -- the contract will be terminated. At that time, the homeowner is free to find another contractor to complete the job, and charge the original contractor should the costs exceed the original contract price.

For more information, you may visit the California State Licensing Board website at: http://www.cslb.ca.gov/consumers/beforehiring.asp#13