Hiring a contractor is one of the largest discretionary transactions most households make, and it is the one people do with the least information. You buy a car after reading a dozen reviews. You hire someone to rebuild your bathroom after two phone calls and a gut feeling.
The good news: the bad outcomes are mostly predictable. Projects that go badly usually show warning signs before any money changes hands. What follows is the sequence that catches most of them, in the order it makes sense to do it.
Step 1: Verify the License Before You Do Anything Else
Almost every state licenses general contractors and specialty trades — electrical, plumbing, HVAC, roofing. The licensing body is usually a state contractors board, a department of labor and industry, or a professional regulation agency. Every one of them has a free public lookup.
Look up the license number the contractor gives you and confirm three things:
It's active and in the right classification. A general contractor's license does not cover an electrician's work in most states. A roofing license does not cover structural framing.
It's in the name of the business you're hiring. Contractors sometimes operate under a license held by someone else — a relative, a former partner, a "qualifying individual" who has no involvement in the day-to-day. That arrangement is illegal in most jurisdictions and it means you have no real recourse.
There's no disciplinary history. Most state lookups show complaints, suspensions, and citations. One resolved complaint over ten years is noise. A pattern is a pattern.
If a contractor cannot or will not give you a license number, the conversation is over. This is not a rude question and it is not negotiable.
Step 2: Confirm Insurance — Both Kinds
Ask for a certificate of insurance and ask that it be sent directly from the insurance agent, not forwarded by the contractor. Certificates are trivially easy to fake and expired ones look identical to current ones.
You want two coverages:
General liability covers damage to your property. If a crew puts a foot through your ceiling, this pays for it. Typical residential coverage runs $1 million per occurrence; anything under $500,000 is thin for meaningful work.
Workers' compensation covers injuries to the contractor's employees. This is the one people skip and the one that can be genuinely catastrophic. In many states, an uninsured worker injured on your property can pursue a claim against the homeowner. If the contractor is a true sole proprietor with no employees, they may be legitimately exempt — but confirm that, in writing, rather than assuming it.
Step 3: Get Three Bids, and Read Them Sideways
Three bids is the standard advice and it's correct, but the reason is often misunderstood. You are not shopping for the lowest number. You are building enough context to tell whether any of the numbers are sane.
Compare scope, not totals. A cheaper bid is often cheaper because it excludes something — permits, disposal, materials at a lower grade, subfloor repair that the other two contractors assumed. Line up the bids item by item and find the differences.
Be suspicious of the outlier in either direction. A bid 40% below the others usually means something was missed or someone plans to make it up in change orders. A bid 40% above may reflect a contractor who doesn't want the job and priced accordingly.
Look at how the bid is written. A one-line bid on a text message for a $30,000 project tells you how the rest of the project will be documented.
Step 4: Actually Call the References
Ask for three references from jobs completed in the last year, plus one from a job two or three years back. The older reference is the valuable one — it tells you whether the work held up and whether the contractor answered the phone when something failed after the warranty conversation got awkward.
Useful questions, in rough order of usefulness:
- Did the final cost match the contract? If not, why?
- How did they handle the thing that went wrong? (Something always goes wrong. A reference who says nothing went wrong either wasn't paying attention or is a relative.)
- Were they on site regularly, or did they disappear between milestones?
- Would you hire them again for something bigger?
- How was cleanup?
Ask to see a job in progress if the contractor has one running. A crew's habits on an active site — how tools are stored, how the space is protected, whether the trash is contained — tell you more than a portfolio of finished photos.
Step 5: Insist on a Written Contract With These Elements
A real contract for residential work should include:
- Scope of work in enough detail that a stranger could tell whether it was completed
- Materials specified by brand, model, and grade — "tile" is not a specification
- A payment schedule tied to milestones, not to dates
- Start and substantial completion dates, with what happens if they slip
- Change order process — how changes get priced and approved, in writing, before the work happens
- Who pulls permits (it should be the contractor)
- Lien waivers from the contractor and any subcontractors, provided at each payment
- Warranty terms on labor, separate from manufacturer warranties on materials
The lien waiver point deserves emphasis. In most states, a subcontractor or supplier who hasn't been paid can place a lien on your property even if you paid the general contractor in full. Collecting signed lien waivers as you pay is the only thing that protects you from paying twice.
Payment: The Single Most Reliable Red Flag
A deposit of 10% to 30% is normal, depending on the scale of the job and how much material has to be ordered up front. Larger deposits happen on custom work with long lead times, and they should be justified with an actual materials order.
What is not normal: a demand for half or more of the total before work begins, a request to pay in cash, a request to make the check out to an individual rather than the business, or pressure to pay for the whole job through a financing arrangement the contractor arranges.
Never make the final payment until the punch list is complete and — where applicable — the work has passed final inspection. Retaining 10% until then is standard practice and reasonable to ask for.
Red Flags That Are Actually Red Flags
Door-to-door solicitation after a storm. Storm-chasing roofing and siding operations follow hail and wind events, work fast, and leave. Some are legitimate. The base rate is not good.
Discouraging permits. "We can do it without a permit and save you the fee" means the work won't be inspected, may not be legal, and will surface at resale or when you file an insurance claim.
No physical address. A P.O. box and a cell number is a business that can vanish.
Pressure and expiring discounts. "This price is only good today" is a sales tactic, not a construction practice.
Refusing to put things in writing. Every single time.
Asking you to obtain the permit yourself. In most jurisdictions the permit holder is responsible for code compliance. If you pull it, you own the liability.
A Note on Reviews
Online reviews for contractors are noisier than for restaurants, because the sample is small and the emotional stakes are high. Read the three-star reviews — they're where the specifics live. Look for patterns across platforms rather than the average on any one. And weigh recent reviews heavily: contracting businesses change hands, lose their best foreman, and expand past their capacity all the time.
Looking for a licensed contractor near you? Browse our directory of local contractors and home service companies by trade, with addresses and contact information.