Hiring a contractor is a significant decision, whether it’s for a home renovation, construction project, or any other type of work. For some projects, they will be with you for a day or so. For others like a major renovation or new construction, you may spend years working with them. To ensure a successful and stress-free experience, it’s crucial to be aware of potential red flags when selecting a contractor. Here are some contractor red flags to watch out for:
What Are the Warning Signs to Look for When Hiring a Contractor?
Question posed by Lysa on Facebook
Lack of Proper Licensing
A reputable contractor should have the necessary licenses to operate their business legally. I can’t stress this one enough. I have known many contractors over my career that weren’t actually licensed to complete the work they were hired to do. They often worked under someone else’s license or without one altogether. Does this mean that they lack the skillset to complete the work? Not necessarily. But it may be a warning sign of something else. They may have had it in the past and lost it for a number of reasons. Lawsuits, bankruptcy, delinquent payments, or lack of finances are just a few potential reasons. We’re not talking about passing the Bar exam here. A couple days or weeks of studying, taking the required classes and paying a couple hundred dollars is all it takes. If that’s not worth their time, then they aren’t worth yours. Ask for a copy of their business licenses. If they won’t provide one, search their name in your state’s online directory to get your answer.
Lack of Insurance
Never hire a contractor who is not able to provide verification that they are insured. It’s as simple as them calling or emailing their insurer and asking for them to send you a blank insurance certificate. If a contractor was working in your home, injured themselves on your property, and was uninsured, guess who’s paying the bill. The same goes for construction damages as well.
Let’s say you’re hypothetically doing a minor renovation in a small guest bathroom on the second floor. The contractor doesn’t insulate the wall where he stubbed out the water supply line and it freezes and bursts. Water ruins that bathroom, the kitchen below, and the hordes of boxes full of family heirlooms in the basement. If they are uninsured, the only way you are getting the contractor to pay for it is by calling your lawyer. Even if you win, they may not have the finances to take care of it anyway which leaves you and your insurance company on the hook.
Handshake Contract
If I have to hear another contractor say something along the lines of “I’m old school. I do business through a handshake – that’s my word” again, I will throw them out of the house. That’s not old school. That’s unprofessional. Anyone can walk in the door and tell you your project is going to cost $150,000.00, but what does that include? What are the levels products that are budgeted for? Are products even in that budget?!?
Don’t settle for vague assurances; demand clarity and transparency. Insist on a detailed, written contract that specifies what is included and excluded. This will not only protect your interests but also contribute to a smoother, more successful project.
Unrealistically Low or High Bids
Naturally, it’s a good practice to solicit multiple bids for any project. However, does that mean you should automatically opt for the lowest bid? Multiple bids serve a crucial purpose – they either help establish a reasonable average cost or eliminate contractors who are either undercutting or overpricing a project.
When you encounter bids that are significantly lower than the rest, it’s essential to exercise caution. Such abnormally low bids could signal the use of inferior materials, inexperienced labor, or the potential for hidden costs down the road. On the flip side, exceedingly high bids might raise eyebrows, but they’re not always indicative of opportunism. They could signify a commitment to top-tier materials, the presence of a dedicated general contractor overseeing the project, or careful budgeting to accommodate unforeseen expenses.
This is coming from someone who is consistently the highest bid on every project. There a few things I hate more than having to go back to clients and say “it’s going to cost more” after I have provided them with a price. If they make a change that drives costs, that’s their choice. But if a price was given and the details were agreed upon, the price shouldn’t change. This is why my contract breaks down the construction and finishes for the materials, a breakdown of information about each space, and all of the services that I am going to provide at that price.
Lack of References
Anyone who has been in business for any length of time should be able to provide references from previous clients, assuming they did a good job. They aren’t going to put unhappy clients on their list so there will always be biases when you contact references. If they were willing to be on a reference list, the contractor likely fulfilled their duties and lived up the their expectation. Ask questions about the scope of the project, quality of work, how they communicated, and if they were reliable throughout the process.
If a contractor is unwilling to give references, that’s another red flag. In any given year, most contractors are working on multiple if not dozens of projects. If they don’t have a couple people willing to sing their praises, you likely won’t be either!
Negative Reviews
This will be one of the easiest ways to find out if you should entertain acquiring a bid from a contractor. You likely found them online which means their reviews are likely right there as well. If they have a lot of good reviews and a few poor ones, read both and take the bad with a grain of salt. People who are upset, frustrated, or feel wronged are much more inclined to write a review than someone who is blissfully happy and otherwise not thinking about it.
A complete lack of reviews is another thing you should look out for. Maybe they don’t have an online presence because they work off of referral or because they are not tech savvy. Maybe it’s because they have changed their company name to avoid something or they recently started the company. Speaking to their references should fill in those plot holes for you.
Poor Communication
This is one of the complaints I hear most from clients about their contractors. Consistent and open communication is key to a successful project. If the contractor is difficult to reach, takes a long time to respond to calls or emails, or avoids answering your questions, it may indicate problems down the line. Remember that you’ll likely be working with them for weeks, months, or even years depending on your project size. If they don’t answer your calls or emails when they are trying to win your business, then they aren’t going to after the project starts either.
Large Payments Upfront
We’ve all probably heard stories of someone writing a contractor a big check and all of a sudden, they disappear. Don’t let yourself become the star of that horror movie. Subcontractors don’t bill until after their work is completed so why would the contractor need a large upfront deposit due? Unless they are supplying expensive materials like windows, doors, cabinetry, etc. up front, then there is likely no good reason on why they should have a substantial amount down. Protect yourself and your investment by working out a sensible payment plan in advance. If they refuse to work with you and demand unreasonable amounts up front, that’s another big red flag. They may be looking to take advantage of you or need your money to pay other debts due for other projects.
Pushy Sales Tactics
Contractors who pressure you to sign a contract or make a quick decision may not have your best interests at heart. Take your time to make an informed choice by getting their license and insurance information, a list of references, a detailed scope of work on their bid, and check their online portfolio and reviews.
Lack of Permits
Proper permits and inspections are often required for construction projects. A contractor who suggests bypassing these legal requirements may not be acting responsibly. Permits often protect you from shoddy work as things that don’t pass inspection get red tagged which means the project cannot progress until it has been fixed and re-inspected. They don’t protect you from things going wrong though. The inspector could approve something on a Wednesday and it could have failed Thursday morning and it does not matter to them one bit.
I like to put a caveat to this because I think scope of type of work is important. If you are swapping out and replacing a toilet or faucet, you technically need a permit. Would I personally get one for that or other small updates? No, but that’s my personal choice. I’m also in this industry and know what good work looks like and what bad work looks like. For larger projects, I am definitely in favor of getting the proper permits with your local building office.
Inadequate Portfolio
Most companies have online portfolios of their work. This will be an easy way to understand if they are the right fit for your project. If you are looking at doing an major upscale remodel on your home and the contractor you are considering only has what seems to be small and low-end work in their portfolio, you probably don’t want them apart of your project. Look for contractors who have portfolios similar to what you are looking to accomplish.
No Warranty or Guarantee
Also known as a tail-light warranty, watch out for contractors who won’t stand behind their work. Their warranty of guarantee should be in their estimate or contract. Most only offer a 2-year guarantee for their work, which is standard among the industry. If they won’t put it in writing, and you’ve made your final payment to them, it may be quite difficult to get them back to fix something
The Consultant’s Thoughts
To avoid potential problems and costly mistakes, it’s essential to do your due diligence when hiring a contractor. Get multiple quotes, thoroughly research each candidate, and trust your instincts. A well-vetted contractor is more likely to deliver quality work and a successful project outcome.