How to Hire a Remodeling Contractor: Estimates, Contracts and Payments

Get at least three detailed written estimates, verify the contractor's license and insurance, sign a written contract that spells out the scope, dates, payments and who pulls permits, and never pay for the whole job up front. The Federal Trade Commission's guide to hiring a contractor says the lowest bidder may not be the best choice. The steps below turn that guidance into a checklist you can use.

Know who you are hiring

The FTC separates two kinds of contractor. A general contractor manages all aspects of a project, including hiring and supervising subcontractors, getting building permits and scheduling inspections. A specialty contractor installs particular products, such as roofing or flooring. A large remodel with several trades usually points to a general contractor, while a single-trade job may not need one.

Licensing rules vary. The FTC says they can range from simple registration to a detailed qualification process, and that if your state or locality requires a license you should confirm it is current. Your state licensing board, consumer protection agency or local building department can tell you what applies where you live.

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Compare estimates on equal terms

The Consumer Federation of America advises getting at least three written estimates before signing. Each should include a detailed description of the work, start and completion dates, a payment schedule, a list of materials, the total cost and any warranties. The FTC adds that if prices differ widely, you should ask each contractor to explain why.

Bids are only comparable when they cover the same work. Line these items up side by side for every bid:

A blank in one bid is a question to ask. A large gap in totals often traces back to differences in scope or materials, not skill.

Ask the right questions

• How many projects like mine have you completed in the last year? The FTC suggests asking for a list so you can judge familiarity with your type of job.
• Will my project need a permit? The FTC notes that most states and localities require permits for building projects, even simple jobs like decks, and that a competent contractor obtains them before starting.
• Can I speak to recent local references? The Better Business Bureau suggests asking references whether the contractor stuck to the estimated budget and schedule.
• Who is responsible for cleanup, and who pulls permits? The Better Business Bureau says the contract should name both.

The Consumer Federation of America adds that the contractor, not the homeowner, should pull the permits, and that you should make sure inspections are completed and passed before making the final payment.

Verify insurance and protect yourself from liens

Ask for copies of current insurance certificates and confirm coverage with the insurer or your state insurance regulator. The Consumer Federation of America recommends confirming liability, workers' compensation and property damage coverage. It also warns about liens. If a contractor fails to pay subcontractors or suppliers, they may be able to file a claim against your property in some states. Ask your state or local consumer protection agency how this works where you live, and ask for a written release of lien stating that everyone has been paid before you make the final payment. Fairfax County's consumer guidance similarly advises getting a contractor's affidavit that all subcontractors and suppliers have been paid.

What a solid contract includes

According to the Better Business Bureau's tips, a contract should include contact information, start and completion dates, a detailed description of the exact work, material costs, payment arrangements and warranty information. Put verbal promises in writing. Do not sign a contract with blank spaces or one you do not understand, and do not let any work begin without a signed contract. Fairfax County adds that you should insist on a written warranty on materials and work.

Set up a payment schedule that follows the work

Guidance on deposits varies. The Consumer Federation of America says typical deposits run 15 to 25 percent and that state or local law may limit what can be requested. Its rule is to pay only the amount due for the completed phase and never pay for the whole job up front. It also suggests paying by credit card when possible for extra protection, rather than cash. Here is a hypothetical schedule for a $40,000 project. It is our example, not a standard, and your state may set its own limits.

The final payment is tied to the same items Fairfax County and the Consumer Federation of America emphasize: complete work, a passed inspection and proof that suppliers were paid. Whatever schedule you agree on, write it into the contract.

Budget before you call

Contractors quote what they price, so it helps to know your own number first. Use the home renovation cost calculator to add fees and a contingency to a per-square-foot range, or the kitchen remodel calculator to itemize a kitchen. If your project involves a deck, our deck safety guide explains why structural work should be done and inspected properly.

Your takeaway: before you sign anything, fill in the comparison sheet for three bids, confirm license and insurance, and write the payment schedule into the contract so each payment follows completed work.