red flags to watch out for when hiring a contractor

July 16, 2024 Havard Cooper

Red flag on single pole, waving in the wind.

Hiring a contractor for home improvements or repairs is a significant decision that can impact your property's value and peace of mind. While many contractors are skilled professionals, it's crucial to be aware of potential warning signs that could indicate unreliable or fraudulent practices. This guide will help you confidently navigate the contractor selection process, ensuring you make an informed decision for your next home project.

Understanding the Importance of Contractor Vetting

Before diving into specific red flags, it's essential to recognize why thorough contractor vetting is crucial:

Protect your investment: Home improvements often involve substantial financial commitments.
Ensure quality work: A reputable contractor will deliver results that meet or exceed your expectations.
Avoid legal issues: Proper vetting can help you steer clear of contractors who may not adhere to local regulations or building codes.
Peace of mind: Knowing you've hired a trustworthy professional allows you to focus on the excitement of your home improvement project.

RED FLAGS TO WATCH OUT FOR

LACK OF PROPER LICENSING AND INSURANCE
One of the most critical factors to consider when hiring a contractor is their licensing and insurance status.
- Verify licensing: Check if the contractor holds the necessary licenses for your state or locality. You can usually verify this information through your local licensing board or consumer protection agency.
- Confirm insurance coverage: Ensure the contractor has both liability insurance and workers' compensation coverage. This protects you from potential lawsuits if accidents occur on your property.
According to the National Association of State Contractors Licensing Agencies (NASCLA), working with a licensed contractor provides numerous benefits, including access to recovery funds if issues arise.

One client, Tom, was initially inclined towards the lowest bid, which was significantly lower than the others. The cost was tempting, but we advised him to proceed with caution. Our 'Bid Letter' required the contractor to verify their licensing and insurance status. Upon closer inspection, it was revealed that the low-bidding contractor lacked the necessary licensing and had minimal insurance coverage. We explained to Tom the potential risks involved. For instance, if there were an accident on-site, such as a slip-and-fall, Tom could be held liable for medical expenses and face potential lawsuits. This scenario could not only halt the project but also cause significant financial strain. Taking our advice, Tom decided to go with a contractor who met all the licensing and insurance requirements. The project was completed without any legal or financial issues, reinforcing the importance of due diligence. Our proactive approach and commitment to safeguarding our clients’ interests ensured a successful and stress-free renovation for Tom, highlighting the critical need for proper licensing and insurance in every project."

Havard Cooper Architect

2. PRESSURE TO SIGN IMMEDIATELY OR UNUSUAL PAYMENT TERMS

Be wary of contractors who use high-pressure sales tactics or request unusual payment arrangements.

Avoid rushed decisions: A reputable contractor will give you time to review the contract and make an informed decision.
Be cautious of large upfront payments: While a small deposit is standard, be wary of contractors requesting a large percentage of the upfront cost. According to the American Institute of Architects (AIA), a standard down payment typically ranges from 10% to 20% of the project's total cost.
Refrain from cash-only deals: Legitimate contractors should be willing to accept checks or credit cards, which provide a paper trail.

3. VAGUE OR INCOMPLETE CONTRACTS

A detailed, clear contract is essential for protecting both parties involved in a home improvement project.

Insist on specifics: The contract should include a detailed scope of work, materials to be used, project timeline, and payment schedule.
Beware of missing details: If the contract lacks specific information or contains vague language, it's a red flag.
Ensure all verbal agreements are in writing: Don't rely on verbal promises; make sure all aspects of the project are documented in the contract.

4. POOR COMMUNICATION OR PROFESSIONALISM

How a contractor communicates and presents themselves can be indicative of their overall professionalism and reliability.

Assess responsiveness: If a contractor is difficult to reach or slow to respond during the bidding process, it may indicate future communication issues.
Evaluate punctuality: Tardiness or missed appointments during initial meetings can be a sign of poor time management.
Consider presentation: While contractors aren't expected to wear suits, they should present themselves and their business professionally.

5. Lack of References or Poor Online Reviews

A contractor's track record is one of the best indicators of their reliability and quality of work.

Request and check references: Ask for at least three references from recent projects similar to yours, and take the time to contact them.
Research online reviews: Look for patterns in online reviews on platforms like Google Reviews, Angie's List, or Better Business Bureau.
Be wary of contractors with no online presence: In today's digital age, a complete lack of online information can be suspicious.

6. UNUSUALLY LOW BIDS OR PRICE FLUCTUATIONS

While it's tempting to go with the lowest bid, an unusually low estimate can be a red flag. As the adage goes, “you get what you pay for.”

Compare multiple bids: Get at least three estimates to understand the reasonable price range for your project.
Question significantly lower bids: If a bid is much lower than others, ask the contractor to explain how they arrived at their price.
Be cautious of price changes: Once a contract is signed, the price should remain stable unless you request changes to the scope of work.

7. RELUCTANCE TO PULL PERMITS

Permits are crucial for ensuring work meets local building codes and safety standards. If you live in a multi-family building, such as a co-op or condo, you’ll usually need a work permit even if the Department of Buildings doesn’t require the work to be filed. The permitting process is not as easy as it should or can be but doing work without them can lead to much bigger problems.

Performing work without the necessary permits can lead to several significant consequences. Legally, homeowners and contractors may face hefty fines and penalties, and authorities can issue stop-work orders, halting the project until proper permits are obtained. This often results in increased costs, as unpermitted work may need to be redone or removed entirely to comply with building codes. Additionally, insurance companies may raise premiums or refuse to cover unpermitted work, leading to higher out-of-pocket expenses. From a property value and sale perspective, unpermitted work can complicate the sale process. Potential buyers might be wary, or lenders may refuse to finance the purchase. Moreover, the unpermitted work might not be included in the property’s appraised value, negatively affecting its overall worth. Safety concerns are also paramount, as work done without permits may not meet safety standards, posing risks to occupants and potentially leading to accidents or injuries. In such cases, insurance companies might deny claims, leaving the homeowner financially responsible. Furthermore, unpermitted work can impact resale value, as sellers must disclose such work to potential buyers, which can deter buyers and reduce offers. Buyers may also require that unpermitted work be brought up to code as a condition of sale, adding to the seller's costs. Lastly, there are significant legal liabilities, including the risk of lawsuits if someone is injured as a result of unpermitted work and potential code enforcement actions from local authorities, leading to court costs and additional legal fees. Ensuring all work is properly permitted helps avoid these potential consequences and ensures a smoother, safer, and more financially secure renovation process.

Havard Cooper Architect

Understand permit requirements: Familiarize yourself with the permits required for your project in your area.
Expect contractor cooperation: A reputable contractor should be willing to obtain necessary permits or assist you in doing so.
Be wary of permit avoidance: Contractors suggesting you pull permits yourself or avoid them altogether may be trying to cut corners.

Additional Considerations

Subcontractor Relationships
Understanding how contractors work with subcontractors can provide insight into their project management skills.
- Ask about subcontractor use: Clarify which parts of the project, if any, will be handled by subcontractors.
- Verify subcontractor qualifications: Ensure subcontractors are licensed, insured, and reputable.
- Understand communication channels: Clarify how you, the main contractor, and any subcontractors will manage communication channels.

Environmental and Safety Practices
Responsible contractors prioritize environmental sustainability and safety in their work practices.
- Inquire about waste disposal: Ensure the contractor has a plan for proper disposal of construction waste.
- Ask about safety protocols: Reputable contractors should have clear safety guidelines for their workers and your property.
- Consider eco-friendly options: If sustainability is important to you, discuss environmentally friendly material and practice options with your contractor.

Taking Action: What to Do if you spot red flags

If you encounter any of these red flags during your contractor search or hiring process:
1. Trust your instincts: If something feels off, it's worth investigating further.
2. Ask questions: Don't hesitate to seek clarification on any concerns you have.
3. Document everything: Keep detailed records of all interactions, including dates, times, and topics discussed.
4. Seek second opinions: Consult with other contractors or home improvement professionals if unsure about a particular issue.
5. Report fraudulent behaviour: If you encounter a contractor engaging in dishonest practices, report them to your local consumer protection agency or contractor licensing board.

Conclusion

Hiring a contractor is a significant decision that requires careful consideration and due diligence. By being aware of these red flags and taking proactive steps to vet potential contractors, you can significantly reduce the risk of a negative experience. Remember, a trustworthy contractor will welcome your questions and concerns, providing transparent and professional responses throughout the process.

By prioritizing proper licensing, clear communication, detailed contracts, and a solid track record, you'll be well on your way to finding a reliable contractor who can turn your home improvement dreams into reality. Stay vigilant, trust your instincts, and don't hesitate to walk away if something doesn't feel right. Your home is one of your most valuable assets, and it deserves the care and expertise of a truly professional contractor.