Federal Trade Commission | consumer.ftc.gov

Hiring a 

Contractor

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Adding a room, renovating a basement, or doing some 

much-needed repairs? Finding 

a good contractor is important 

— a home improvement project 

gone wrong can cost you. A 

good ad isn’t proof a contractor 

does quality work. Find out for 

yourself. Check with friends, 

neighbors, or co-workers who’ve 

had improvement work done, 

and check out a contractor’s 

reputation on online ratings sites 

you trust. Get written estimates 

from several firms, keeping in 

mind the lowest bidder may 

not be the best choice. Also 

important: know the signs of a 

scam.
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Finding a Contractor

Depending on how big or complex a project is, you might 

hire a: 

● general contractor, who manages all aspects 

of a project, including hiring and supervising 

subcontractors, getting building permits, and 

scheduling inspections

● specialty contractor, who installs particular products 

like cabinets and bathroom fixtures 

● architect, who designs homes, additions, and major 

renovations — especially ones involving structural 

changes

● designer or design/build contractor, who provides 

both services

Do Your Research 

Check with friends, neighbors, or co-workers who’ve 

used a contractor

If you can, take a look at the work done and ask about their 

experience.

Look at sites you trust that post ratings and reviews

Do people seem to have similar experiences, good or bad? 

You also can check out a contractor’s online reputation by 

searching for the company’s name with words like “scam,” 

“rip-off,” or “complaint.”

Find out how long they’ve been in business

Look for an established company whose record and 

reputation you can check out. 
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Check for qualifications, like licensing 

Many states, but not all, require contractors to be licensed 

and/or bonded. Check with your local building department 

or consumer protection agency to find out about licensing 

requirements in your area. Licensing can range from simple 

registration to a detailed qualification process. If your state 

or locality has licensing laws, make sure the contractor’s 

license is current.

Before You Hire a Contractor

Get Estimates

Once you’ve narrowed your options, get written estimates 

from several firms. Don’t automatically choose the lowest 

bidder. Ask for an explanation to see if there’s a reason for 

the difference in price.

Ask Questions

How many projects like mine have you completed in 

the last year? 

Ask for a list so you can see how familiar the contractor is 

with your type of project.

Will my project require a permit? 

Most states and localities require permits for building 

projects, even for simple jobs like decks. A competent 

contractor will get all the necessary permits before starting 

work on your project. You may want to choose a contractor 

familiar with the permitting process in your county, city, or 

town.
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May I have a list of references? 

A contractor should be able to give you names, addresses, 

and phone numbers of at least three clients with projects 

like yours. Ask each client how long ago the project was 

and whether it was completed on time. Was the client 

satisfied? Were there any unexpected costs? Did workers 

show up on time and clean up after finishing the job? You 

also could tell the contractor that you’d like to visit jobs in 

progress.

What types of insurance do you carry? 

Contractors should have: 

● personal liability

● worker’s compensation

● property damage coverage

Ask for copies of insurance certificates, and make sure 

they’re current, or you could be held liable for any injuries 

and damages that occur during the project. 

Will you be using subcontractors on this project? 

If so, make sure the subcontractors have current insurance 

coverage and licenses, too, if required. 

To find builders, remodelers, and related providers in your 

area that are members of the National Association of Home 

Builders, visit www.nahb.org. To find detailed information 

about a builder, service provider, or remodeler in your area, 

contact your local home builders association. You can find 

your local association at www.nahb.org. 
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Understand Your Payment Options

Don’t pay cash

For smaller projects, you can pay by check or credit card. 

Many people arrange financing for larger projects.

Try to limit your down payment

Some state laws limit the amount of money a contractor 

can request as a down payment. Contact your state or local 

consumer agency to find out the law in your area.

Try to make payments during the project contingent 

upon completion of defined amounts of work

This way, if the work isn’t going according to schedule, the 

payments to your contractor also are delayed.

Get a Written Contract 

Contract requirements vary by state. Even if your state 

doesn’t require a written agreement, ask for one. It should 

be clear and concise and include the who, what, where, 

when, and cost of your project. Before you sign a contract, 

make sure it includes:

● the contractor’s name, address, phone, and license 

number (if required)

● an estimated start and completion date

● the payment schedule 

for the contractor, 

subcontractors, and 

suppliers

● the contractor’s obligation 

to get all necessary permits
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● how change orders are handled. A change order is 

a written authorization to the contractor to make 

a change or addition to the work described in the 

original contract, and could affect the project’s cost 

and schedule. 

● a detailed list of all materials including each 

product’s color, model, size, and brand. If some 

materials will be chosen later, the contract should say 

who’s responsible for choosing each item and how 

much money is budgeted for it (this is also known as 

the “allowance”). 

● information about warranties covering materials and 

workmanship, with names and addresses of who 

is honoring them — the contractor, distributor, or 

manufacturer. The length of the warranty period and 

any limitations also should be spelled out.

● what the contractor will and won’t do. For example, 

is site clean-up and trash hauling included in 

the price? Ask for a “broom clause” that makes 

the contractor responsible for all clean-up work, 

including spills and stains.

● any promises made during conversations or calls. If 

they don’t remember, you may be out of luck — or 

charged extra. 

● a written statement of your right to cancel the 

contract within three business days if you signed it 

in your home or at a location other than the seller’s 

permanent place of business
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After You Hire a Contractor

Keep Records

Keep all paperwork related to your project in one place. 

This includes: 

● copies of the contract

● change orders

● any correspondence with your home improvement 

professionals

● a record of all payments. You may need receipts for 

tax purposes. 

Keep a log or journal of all phone calls, conversations, and 

activities. You also might want to take photographs as the 

job progresses. These records are especially important if 

you have problems with your project — during or after 

construction.

Pay Wisely

Don’t make the final payment or sign an affidavit of 

final release until you’re satisfied

Besides being satisfied with the work, you also need to 

know that subcontractors and suppliers have been paid. 

Laws in your state might allow them to file a mechanic’s 

lien against your home to satisfy their unpaid bills, forcing 

you to sell your home to pay them. Protect yourself by 

asking the contractor, and every subcontractor and supplier, 

for a lien release or lien waiver.
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Know the limit for the final bill

Some state or local laws limit the amount by which the 

final bill can exceed the estimate, unless you have approved 

the increase. 

Know when you can withhold payment

If you have a problem with merchandise or services 

charged to a credit card, and you’ve made a good faith 

effort to work out the problem with the seller, you have 

the right to contact your credit card company and withhold 

payment from the card issuer for the merchandise or 

services. You can withhold payment up to the amount of 

credit outstanding for the purchase, plus any finance or 

related charges.

Use a Sign-Off Checklist

Before you sign off and make the final payment, check that:

● all work meets the standards spelled out in the 

contract

● you have written warranties for materials and 

workmanship

● you have proof that all subcontractors and suppliers 

have been paid

● the job site has been cleaned up and cleared of excess 

materials, tools, and equipment

● you have inspected and approved the completed work
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Signs of a Home Improvement Scam

How can you tell if a contractor might not be reputable? 

You may not want to do business with someone who:

● knocks on your door for business or offers you 

discounts for finding other customers

● just happens to have materials left over from a 

previous job 

● pressures you for an immediate decision

● only accepts cash, asks you to pay everything 

up-front, or suggests you borrow money from a 

lender the contractor knows 

● asks you to get the required building permits

● tells you your job will be a “demonstration” or offers 

a lifetime warranty or long-term guarantee

● doesn’t list a business number in the local telephone 

directory

The Home Improvement Loan Scam

Here’s how it works: a contractor calls or comes to your 

door and offers a deal to install a new roof or remodel your 

kitchen. He says he can arrange financing through a lender 

he knows. After he starts, he asks you to sign papers; they 

may be blank — or he might hustle you along and not give 

you time to read through them. Later you find out you’ve 

agreed to a home equity loan with a high interest rate, 

points, and fees. What’s worse, the work on your home 

isn’t done right or isn’t completed, and the contractor —

who may already have been paid by the lender — has lost 

interest.
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To avoid a loan scam, don’t:

● agree to a home equity loan if you don’t have the 

money to make the payments

● sign a document you haven’t read or that has blank 

spaces to be filled in after you sign

● let anyone pressure you into signing any document

● deed your property to anyone. Consult an attorney, a 

knowledgeable family member, or someone else you 

trust if you’re asked to.

● agree to financing through your contractor without 

shopping around and comparing loan terms

Report a Problem

If you have a problem with a home improvement project, 

first try to resolve it with the contractor. Many disputes can 

be resolved at this level. Follow any phone conversations 

with a letter you send by certified mail. Request a return 

receipt. That’s your proof that the company received your 

letter. Keep a copy for your files.

If that fails, consider getting outside help like:

● your state attorney general or local consumer 

protection office 

www.usa.gov/directory/stateconsumer

● your local home builders association 

www.nahb.org

● your local media’s call for action lines 

www.callforaction.org

● dispute resolution programs 

www.consumer.ftc.gov
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For More Information

National Association of Home Builders

www.nahb.org 

National Association of the Remodeling Industry 

www.nari.org 

The American Institute of Architects

architectfinder.aia.org 

ENERGY STAR

www.energystar.gov/newhomes

The FTC works to prevent fraudulent, deceptive, and 

unfair business practices in the marketplace and to provide 

information to help consumers spot, stop, and avoid them. 

To file a complaint or get free information on consumer 

issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP 

(1-877-382-4357); TTY: 1-866-653-4261.

Watch a video, How to File a Complaint, at 

consumer.ftc.gov/media to learn more. The FTC enters 

consumer complaints into the Consumer Sentinel Network, 

a secure online database and investigative tool used by 

hundreds of civil and criminal law enforcement agencies in 

the U.S. and abroad.
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Federal Trade Commission

consumer.ftc.gov

March 2014