Home improvement: 5 steps for finding the right contractor

By David Pitt, Associated Press
DES MOINES, Iowa – Anyone who has ever wanted to remodel a kitchen or a bathroom knows how such projects tend to linger. When times are tight, homeowners often put off renovations as they cut back on every thing but necessities.

All told, spending on remodeling and repairs fell to an estimated $280 billion last year. That was down from $326 billion at the 2007 peak, according to the Joint Center for Housing Studies at Harvard. And as long as the housing market languishes, the recovery will isn't likely to gain much momentum.

At the same time, although there are many unemployed home contractors hungry for work, it doesn't mean the expertise level has risen.

"There's a huge labor pool out there of people who may be qualified in their particular area, but not qualified to manage or run an entire remodeling project," said Dean Herriges, president-elect of the National Association of the Remodeling Industry. "The market is flooded with people who may think they're capable of doing remodeling projects, but they're not."

The economy has been hard on contractors who have experienced the downside of a housing boom. That has created a lot of eager carpenters, plumbers, drywall installers, and others looking for work. So if you're looking to a contractor you may be able to find an attractive price, but choose carefully.

Here are five key steps to follow in the hiring process.

1. Obtain referrals

There are several ways to find potential contractors.

Usually, the easiest is to begin by seeking recommendations from family members and friends. Tap into social networking sites, such as Facebook, to expand your reach. Keep in mind though that anyone making a personal referral may not have had the same type of work done or had it done on the same budget as you're anticipating.

Another option is to join the consumer-reviews website Angie's List at http://www.angieslist.com/ and research contractors there. Joining requires a monthly fee, often around $5, although it's cheaper when you sign up for a year or more.

Suggestions could also come from local professionals who do business with reliable contractors, including your city's building inspector or a lumber supply store.

2. Interview candidates

Armed with a list, make some calls to get a sense for how comfortable you'll be with them working in and around your home.

The NARI suggests a list of questions to ask a potential contractor at http://www.nari.org/ . They include:

• How long have you been in business?

• Who will be assigned as project supervisor for the job and will workers be employees or subcontractors?

• Does your company carry workers' compensation and liability insurance?

• How many projects like mine have you completed in the past year?

• May I have a list of references from those projects and a list of business referrals or suppliers?

• Do you belong to any professional associations?

3. Avoid red flags

During your search it's helpful to know what signs of trouble should give you pause. For example, a contractor offering an extremely low bid signals he's likely cutting costs with cheap material or on labor. Poor quality materials or a contractor rushing to get a project done cheaply could end in disaster.

"You're shopping for a final finished product. That doesn't necessarily mean the lowest price," said Herriges, who is also a contractor in Mukwonago, Wis. "You're shopping for value."

Here are a few other red flags from a potential contractor:

• There's a request for significant money up front, say, more than a third. It's a sign there may be cash flow issues.

• There's a demand to be paid in cash only.

• The contractor doesn't have a physical business address, just a post office box number.

• The contractor sought you out saying he was in the area and wanted to give you a discount.

4. Narrow the field

From the calls you make, winnow your choices down to three. Doublecheck references to make sure past projects were done on time, at the expected price, and that the quality and cleanup was satisfactory.

State consumer affairs or consumer protection agencies often register contractors and keep records of complaints. Check to see if your state does at a website run by the federal government: http://www.usa.gov/directory/stateconsumer/index.shtml.

Many local or state governments also require proof of licensing before a contractor can apply for necessary permits. The Better Business Bureau also is a resource for checking on past complaints.

After all of the background checks, set up face-to-face meetings with those who pass your initial screen to discuss your project and get written estimates. Make sure to ask for an estimate that breaks down material and labor costs so you'll be able to make specific service comparisons.

5. Finalize the deal

Get an agreement in writing. A formal contract will provide protection in case something goes wrong.

For instance, problems may arise if the contractor doesn't pay his suppliers. If he still owes money on the material or labor used in your project, you'll want to have a lien waiver in place. This prevents a lumber company or subcontractor from placing a lien on your home for the contractor's unpaid bills.

Also ask for a certificate of insurance proving the contractor has liability and workers' compensation insurance in case there's an accident.

The contract also should include details of a beginning date, a completion date, and how payments will be made. It's typical to pay a third up front, a third when the project is half done and the final third once the job is done and meets your expectations.