Hiring the right contractor is vital for any homeowner or investor, whether you are making home improvements, developing a property, or flipping a house. Choosing an unprofessional contractor will cost you headaches, unnecessary time, and wasted money. However, you can avoid this by recognizing the signs of a bad contractor, like overpromising, unfamiliarity with permits, or simply being unresponsive. Learn how to find a great contractor that fits your needs.
1. Making Overgeneralized Estimations
A contractor is meant to oversee the entire project, whether it’s something simple or a renovation of a whole room or property. Although most contractors wear multiple hats, part of their role is to outsource some of the work to subcontractors, find the right materials, and make sure they have the right equipment for the job. In order to do all of this successfully, they need to know important details like budget, specifications, and timelines to get the right resources involved. If they don’t discuss these things with you in detail, it’s better to move on to the next contractor.
Harper Nelson of REI Insiders experienced this when he hired a contractor to remodel his kitchen. The contractor appeared professional and came with a good recommendation. However, the timeline quickly stretched from six weeks to three months. The contractor was frequently unresponsive, often not showing up for days at a time with no explanation. When he did show up, his work was sloppy and rushed—even installing the kitchen cabinets unevenly. Ultimately, the contractor had to be let go.
How to Avoid
Before hiring a contractor, meet with them to go over your project and ask them detailed questions. If they are unable to answer or address your concerns to your liking, it’s better to move on to the next contractor. As Harper Nelson says, “I learned the importance of setting clear expectations and maintaining constant communication. I also learned to trust my gut. If something seems off or too good to be true, it probably is.”
Consider asking the following questions to evaluate your potential contractor’s plans and preparedness:
- Will you be outsourcing any of this work?
- Will you work with a team?
- How will payment work?
- How are you calculating this price?
- What’s your estimated timeline for completion? What’s your procedure if the project takes longer than planned?
- What are some potential obstacles that could come up? How are you planning for them?
- What type of work is included or excluded in the estimated price?
- How will you communicate with me during the project?
In addition, make sure the contract includes detailed information about the scope of work and a timeline for completion. Ask to have the contract include a clause that if they’re not complying with the timeline or within the budget, then you receive compensation or a refund of the deposit made.
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2. They’re Unfamiliar With Required Permits
Many municipalities require permits for renovations involving plumbing, electrical, and demolition. These permits are required for personal and public safety reasons. If a contractor appears lax about permits, is unwilling to obtain a permit, or is unfamiliar with the requirements, it’s likely to cause bigger issues down the road. Keep in mind that when your contractor lies or simply fails to get the correct permits, the homeowner is the one who pays the consequences. Circumventing permit protocols can lead to the following:
- Large fine from your city
- Major delays in the renovation project
- Void your homeowner’s insurance
- Issues selling the property in the future
DIY influencer and investor Cloe Thompson experienced this firsthand. She originally hired a contractor for a major home renovation, but started seeing many signs of a bad contractor. Cloe fired him and was left with a gutted house. Although she then found a good quality contractor, the first contractor’s failure to get the correct permits ended up bringing the project to a stop. Cloe and her family had to wait many months without any kitchen appliances or indoor heating to get the problem remedied.
How to Avoid
Ask any potential contractors directly about what permits are needed, and ask them to include the costs of the permits in their bids. This will expose whether or not they have the knowledge of which permits they need and will clarify pricing. Plus, make sure to check your state’s Department of Building yourself to verify which permits you will need to fulfill your project. If this doesn’t match the information on the bids you receive, it’s a likely sign of a bad contractor.
3. Asking for Payments in Cash
Making or requesting payments in cash is not illegal, but homeowners and investors should be wary if a contractor asks for payment in cash, especially for a large bill. This is especially true if they ask for payment upfront before doing any of the jobs. One of the reasons a contractor may want a cash payment is to avoid taxes, or they may be an unlicensed contractor. Cash payments are also near impossible to prove if you have to gather information down the line for legal or tax reasons.
Matthew Pezon, owner of Pezon Properties, dealt with this situation when he agreed to pay his contractor weekly without receipts. The contractor only partially finished the job, and after a year of delays, $12,000 in lost money and time, Matthew fired him.
How to Avoid
Consider the reasons the contractor wants to be paid in cash and decide if you’re willing to take the risk. If you want to proceed with payment in cash, ensure the payment amount and payment terms are clearly outlined in a contract containing valid contact information. Add a stipulation that you can get in touch with them after project completion for any reason. Before paying any final amount, make sure you do an extensive walk-through of the project and get a paid-in-full receipt from the contractor.
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4. They’re Unresponsive When You Contact Them
Some bad contractors are communicative at the start of the project but will grow increasingly more unresponsive. Others are unresponsive from the start. If you’re getting a quote from a contractor and they take a long time to respond to you, it’s a small but telling sign that you should take seriously. A lack of communication can delay your project, cost you extra money, and unfortunately, there is no way of forcing a contractor to return.
For example, Brett Schiller hired a contractor to make improvements to his home office. While this contractor was initially responsive, he became increasingly uncommunicative as the project progressed. He missed several deadlines without giving any valid reasons. The work that was eventually done was subpar, with numerous errors and oversights that resulted in additional expenses for repairs.
How to Avoid
Although there’s no way to guarantee that your contractor will remain communicative, honest, and thorough during any project, there are many ways to weed out bad contractors and prevent them from no-showing. For example, here are a few ways to research your contractor before hiring:
- Search their name in Google and on social media sites
- Ask for referrals
- Check to see if there are any complaints on the Better Business Bureau website
- Ask for their supplier’s contact information to check if they pay their bills on time
If you have to figure out what to do when a contractor fails to perform, start by keeping extensive notes and documenting all of your agreements, communication, and details about the contractor’s work. Also, avoid agreeing to make any progress payments. Sometimes, bad contractors will show up after short periods of unresponsiveness to complete a portion of the work, collect money for what is completed, and then continue this cycle until the next time they need to get paid.
Progress payments are an agreement to pay contractors for their work completed throughout the project.
One way to avoid the hassle of screening and communicating with bad contractors altogether is by outsourcing property management. In fact, Roofstock is a platform dedicated to real estate investors, with property managers available across the country. With the right property manager, you can trust that they already have a good contractor taking care of your project and that the value of your investments will increase.
5. They Don’t Provide a Written Contract
A formal contract protects both parties in any agreement and speaks to the contractor’s professionalism and knowledge of the industry. A written contract should outline in detail the terms of the job, like costs, time frame, job specification, contact information, and license information. If a prospective contractor doesn’t provide a contract, whether the job is big or small, it may be a sign of a bad contractor. In fact, some states, like New York, legally require licensed contractors to provide a contract.
How to Avoid
Although it can be hard to tell if a contractor is ripping you off, you can prevent many problems by refusing to pay any money without a signed contract in place. Make sure you have a copy of the signed agreement by both parties, as contracts are not binding without signatures. You’ll need a contract in place if the contractor fails to complete the project, fails to complete it according to the terms of the contract, takes payment without completing the work, or charges you more than what was expected on the contract.
6. Constantly Changing Their Pricing
Most contractors will provide an estimate of anticipated costs before finalizing a quote. This should be the contractor’s best professional assessment of costs, which may include subcontractors, materials, and labor for project completion. Although sometimes there are obstacles and changes during a project, the costs that are provided and agreed upon in a contract shouldn’t leave much room for change.
However, it’s not uncommon for bad contractors to present you with a bill for much more money than you originally agreed on. If a good contractor finds an obstacle or change in the project, they should clearly communicate with you and get approval for the additional cost. This is especially true for any project changes, extra work, or discoveries during the course of the job. If you cannot come to a conclusion or feel the contractor is being dishonest, enlist an attorney’s help to negotiate the contract and final payment.
How to Avoid
A common question homeowners and investors ask is “How much over an estimate can a contractor go?” It is relatively common for the price of some projects to change. Investors who make money flipping houses know that the final cost of a renovation is almost always more than the initial estimate. However, this does not mean that a contractor can surprise you with a final price that is higher than their estimate without prior communication.
If the contractor does present you with a surprising bill, make sure you get an itemized invoice and ask the contractor to explain the charges. The invoice should contain the cost of not only labor, but also subcontractors, materials purchased, and suppliers. Don’t pay any money if the contractor refuses to provide an itemized bill.
Here’s how homeowner Tim Connon successfully handled a bad contractor:
“I had a contractor quote me $1,600 to build a simple dog fence in my backyard. He took almost two weeks to build it, then tried to charge me $3,900 for the total job, with most of the cost being labor costs. I found his original online quote he sent us and wrote him a letter detailing how the original quote was much more reasonable. I sent him the letter with a $1,800 check, and stated that we had an attorney on standby if he decided to pursue things any further. He accepted the money, and we never heard from him again.”
7. Showing Up to the Job Late
Showing up late to work is a sign of unprofessionalism in every industry. While many contractors balance many projects at any given time, it’s their responsibility to manage their workload. If a contractor consistently shows up late, you should assume that your final project will be delayed, which may cost you money in the long run. Unfortunately, there are no proven ways to make your contractor work faster, and lateness is often a sign of additional or more serious issues.
This was the case when Eloisa Hife hired a contractor to renovate her kitchen in February, and he stated he would start the work in March. However, he didn’t actually start the work until April, and was then frequently late to the job site and would disappear for days at a time. In the end, he also charged her more than the initial agreement, and the work was not done to the quality that was expected. Eloisa was forced to fire this contractor and spend additional money to get the job done correctly.
How to Avoid
Although renovation delays are somewhat inevitable, good quality contractors will keep you informed about delays and always show up to the job site on time. Screening for bad contractors is simpler and more effective than having to learn what to do if a contractor is taking too long. Before hiring, call their current clients. Ask if they show up on time, if their projects are seeing any substantial delays, their communication style, and quality of work. The right contractor will respect their clients’ schedules and keep their commitments.
8. Asking for Payment in Full Upfront
One of the biggest signs of a bad contractor is when someone asks for full payment upfront without a contract or any work completed. While there are typically some upfront costs, like a percentage as a deposit or for materials to begin the project, good contractors are willing to negotiate payment and payment terms with you. However, asking for all the money upfront is a huge red flag because there is no guarantee that a contractor will complete the job if they already have their full payment.
One homeowner, Ivan Orehovec, had to stop a contractor who was tiling a master bathroom because the quality was so poor. Instead of fixing the problem, the contractor disappeared, taking with him a $25,000 deposit. Luckily, you can avoid having to figure out what to do if a contractor walks off the job by refusing to pay anyone before they’ve completed their work.
How to Avoid
There is almost never a reason to pay your contractor in full upfront, so don’t work with anyone who demands this. Plus, check your state laws before making any advance payment. Some states have limitations on how much a contractor can collect for a down payment. For example, contractors in Maryland are limited to collecting only 33% of the project’s total cost. In California, the Contractors State License Board (CSLB) states that deposits are limited to $1,000 or 10% of the total costs.
9. Hesitant on Providing References
It’s important to find reviews of a potential contractor’s previous work. However, online reviews are somewhat limited. They don’t always provide enough information, and reviews can be skewed and could be posted by disgruntled clients at no fault of your contractor. Instead, ask for references who have had similar projects as your own to get an idea of what you can expect from your prospective contractor. Although some contractors may be hesitant to provide references, the best quality contractors will have a few references ready.
How to Avoid
Contractors should be extremely proud of their work, so procuring positive references shouldn’t be an issue. If someone is hesitant to give you references, it could be a sign of a bad contractor. Explain to them the importance of speaking to references to understand the project timeline, pricing, quality, issues that arose after the fact, and their communication style.
10. Unable to Provide Proof of Insurance
All contractors performing work on residential or commercial spaces should have general liability, automotive, and worker’s compensation insurance. Contractors with employees or subcontractors working in the space should have workers’ compensation. This covers any injury caused on the job site.
If a contractor does not have insurance and is unable to provide you with proof of certificate, then you could be liable for any damage or injury that occurs during or after the project. Damages can include water damage, fire, or structural issues.
How to Avoid
Ask your contractor for a copy of their insurance certificate. You can find out if a contractor lied about insurance by contacting the insurance company listed on the certificate. You also want to ensure that the contractor’s name and information listed under the “Insured” section are the same as what is listed on the contract.
It’s important to understand insurance limits and make sure the limits listed on the certificate are adequate for the job. An insurance limit is the maximum amount an insurance company will pay for a claim that is covered by the insurance policy.
For more details about insurance for contractors, read our full guide to Contractors Insurance Cost & Coverage 2023.
Tips for Finding a Great Contractor
The ability to find and hire a reliable contractor is key to making your home improvement or real estate investing projects successful. Learning how to ask a contractor for a quote and how to evaluate them for their professionalism, reliability, and quality will help you weed out bad contractors. Finding a contractor who is licensed and insured is only part of the process. Consider factors like length of work experience, type of past projects, and their overall sense of professionalism during your communication.
We’ve identified other useful tips to help you find a good contractor:
- Ask for referrals from other people you trust: Referrals are the best leads in the real estate industry, and the same applies to finding a contractor. If someone you know personally had a great experience with a contractor, the contractor is more likely to be reliable and to do excellent work.
- Contact multiple contractors for quotes: You might be surprised at the price range when you get quotes from multiple contractors. Take a close look at the bids so you can compare prices and professionalism. Ideally, you want to get the best deal and the best quality project.
- Check their reviews: Conduct due diligence on your own. Online reviews are a great place to start, but some states have a Department of Buildings with contractors listed to see their work history. New York, Illinois, and California provide resources to help search contractor records and verify information.
- Ask for photos of past work: Images are worth a thousand words. If you can visually see the work and are satisfied with the outcome, you can easily assume yours will fall along the same quality.
- Call their references: If you’re investing a lot of money into a project, this step is worth the effort. It helps you create a whole picture of who you’ll be working with.
- Don’t just care about the bottom line: Expenses are important, especially if you’re in the business of finding homes to flip. However, sometimes you do get what you pay for, so don’t always go with the cheapest quote because that might cost you in the long run.
- Verify their work: Don’t simply trust that every contractor will provide you with the quality of work you expect. Get multiple opinions and check in on the project consistently to prevent any unwelcome surprises after the project is completed.
As you grow your real estate investing business, it will be increasingly important that you learn how to efficiently screen and manage contractors for one-off projects or ongoing maintenance needs. With robust property management software like Avail, you can easily organize bids, current projects, and communications with tenants and contractors, and even sign contracts online. Avail also includes property analytics and accounting tools so you can easily track your payments to contractors.
Frequently Asked Questions (FAQs)
Never pay a contractor without doing your own due diligence. Make sure you have a detailed agreement or contract that outlines the scope of the work, estimated cost, payment methods, and deadlines. Verify that the contractor is licensed, insured, and highly recommended by their references. Make sure to track all payments, and don’t provide the full payment before all the work is completed.
Unfortunately, it’s relatively common for contractors to make big promises and underdeliver—sometimes not completing the project at all or causing even more problems. Many people struggle to understand why contractors don’t show up to their jobs, why they take much longer than planned, and why there are often unexpected expenses. Project delays and added costs are part of the job for any contractor, but good quality contractors will always keep you well-informed of the status of the project, be on time for their work, and stick to an agreed-upon budget.
The first step when you’re unhappy with the work done by your contractor is to have a conversation. Don’t barge into their workspace and start demanding answers, but gather your original contract, agreed timeline, and evidence that things are not meeting your expectations. If you can’t resolve the issue through a conversation, make sure to document problems and conversations with photos or written records. If the problem persists, consider hiring an attorney.
Having to weed out bad contractors is an unfortunate reality for homeowners and investors. By understanding the signs of a bad contractor, you can feel confident that the person you hire next will be right for the job. With the right person in place, you set yourself up for successful, on-time project completion.