Choosing a contractor can be stressful, whether you’re a homeowner, commercial property owner, or business representative looking to hire a contractor. Keeping the 5 points below in mind when hiring a contractor will help match your project with a great contractor.
- With licence. In most states, in order to obtain permits and perform construction services that are typically over the $20,000 monetary limit, the business entity must be licensed by the state in which it is seeking to perform those services. Most states have contractor boards that have lists of active licensed contractors registered in that state. These contractor boards monitor the financial status of these businesses and require proof of passing the state-required exams to obtain a license. The board will set monetary limits on work to be performed and may limit the scope of work to residential or commercial. These licenses normally expire every 2-3 years. An unlicensed contractor operating above the dollar limit for licensing is committing a crime and will not be able to legally obtain permits or perform work. Knowingly using unlicensed contractors can also be a crime. Always check a contractor’s license. If a contractor can’t pass an exam or keep their license active, do you really want this person to do the construction work for you?
- Insured. Most contractors carry a variety of insurance. The most common requirements are liability insurance. The civil liability insurance will pay for the damages that the contractor may generate during the provision of services. For example, a contractor cuts down a tree and it falls on his neighbor’s house, the contractor’s liability insurance will pay for the damage. This is very important because your neighbor could actually go after the person who hired the contractor for the damage caused when the tree left his yard. Always check that this insurance is in force. Verify that the amount equals or exceeds $500,000 or more. This value will help cover most potential damage.
- Guaranteed. Bonding is similar to a form of insurance as well. The most common types of bonds are bid, yield, and pay. A bid bond is a bond that is posted when the contractor delivers his quote estimate to the owner. This bond ensures that the General Contractor must perform the work for the price offered or the bond company has to pay someone to do it. A performance bond is the second type of bond and can be obtained for the value of construction services to potentially pay another contractor to complete the project if the original contractor is unable or unwilling at some point during the life of the project. This is almost like homeowner’s insurance. A payment bond is another type of bond and is also equal to the value of the project. You will pay all subcontractors if the general contractor fails to do so. This prevents subcontractors from placing a lien on the owner’s property and creating a legal nightmare if they don’t get paid. These 3 types of bonds are generally used more in commercial construction and high value contracts. The downside of requiring bonding on a job as owner protection can inflate the cost of a project by more than 5%, and these costs are naturally passed on to the owner.
- Experience. Verify that the contractor you are hiring has experience that matches the type of project the owner is using them for. For example, hiring a residential contractor to build a $3 million hospital when he’s never built anything bigger than a $200,000 house is a risky move. Past experience is often listed on the contractor’s website or company brochure. Doing a little research on a contractor can pay big dividends.
- References. Ask for 3 references from a contractor before signing a contract. Call these references and ask them how the contractor performed and what type of project they used them for. Ask questions about the budget and schedule and how well the contractor performed against them. If these are honest references, it will give the homeowner an idea of how the contractor will perform on their job.