Do's and Don'ts of Hiring a Home Improvement Contractor

Nov. 10, 2010 — -- Hiring a contractor to repair or renovate your home is one of the more expensive things you'll ever do. Make sure you do it right.

Develop a short list of contractors by asking friends and family for referrals. If your neighbors have a handsome new addition, stop by and ask about their contractor. Ask contractors for references, and don't just listen to the references. Look at their homes! Ask contractors for the names of three clients they're currently working for. Call those clients to see how it's going. Chances are if their projects are behind schedule, yours will start late and drag along too.

Click HERE to see a sample home improvement contract.

At last count, 36 states require home improvement contractors to be licensed. Nearly all states license plumbers and electricians. Make sure the contractors you're considering are properly licensed. This is utterly crucial - and more complicated than it seems. For starters, don't take the contractor's word for it, even if he (or she!) shows you a license card. Ask him for the full name of the company, the owner's name and the license number. Call your state and verify the license by company name, owner name and license number. Find out whether your county has its own licensing requirements on top of the state requirements. If so, check with the county too.

Do not accept a contractor's license from a state or county other than where you live. Local law will only protect you if the contractor is licensed to do business in your jurisdiction. Some counties and states do have reciprocity agreements with their neighboring governments. That means if the contractor is licensed in state A, state B considers him qualified to be a contractor too. But it's not automatic. Make sure your state has certified, in writing, that your contractor is allowed to work there.

You also need to know the difference between a contractor's license and a business license. A contractor's license is a specialty license obtained through testing or apprenticeships. By contrast, business licenses are non-specialized. Business owners have to have one whether they're opening a flower shop or a shoe store or an accountant's office. It's possible your contractor needs a contractor's license and a business license. Just know that the latter is not proof of competence.

There's also something called an "occupancy license" or "certificate of occupancy." Many local governments require businesses to pay for one of these any time they move to a new location. It's simply a mechanism for local governments to collect more fees for the treasury and keep track of what companies are doing business in the area. For you, it's useless.