Tip #1: Make sure that the contractor has valid insurance. Your contractor should have two types of insurance in order to protect you while the work is being performed. They are:
General liability insurance - Covers any accidental damage that could occur on your property during the job.
Workers compensation - Covers possible work related injuries at the job site (your home!).
Tip #2: References: The three most important references a contractor can provide concern their current client and the two most recent clients for whom they have performed work. Here are some questions for you to consider when interviewing the references:
Suppliers: Ask the contractor for the names of his or her primary material supplier(s) and then call upon them to inquire about the contractor in question. Ask whether the contractor pays bills promptly and whether or not the supplier would recommend the contractor to any of their customers?
Tip #3: Contracts. Remember these fundamental rules:
(a) Never give a contractor cash, and never provide any type of payment without a written contract.
(b) Never pay a contractor more than 10% of the contract as a down payment after the contract is signed.
(c) Always develop a materials list. Specify the exact materials, parts, product codes, etc.
(d) As the work progresses, you will use a system of 'progress' payments to pay off the contract. These payments should be made at the end of each step of actual work. Example: The foundation has been poured and is set. A payment is due for the concrete and all related labor, or, the framing is completed, then pay for the lumber and the labor costs.Also, remember this, various stages of your project may require a building inspection. Example, electrical, plumbing, framing, etc., all require a sign-off by the building inspector. It is common to require that you see the sign-off by the building inspector before you make the progress payment. The inspector is an impartial third party and he or she will not sign off until the work meets approval.
(e) Withhold at least 10% of the contract amount to be issued as a final payment. Do not make final payment until you have reviewed the completion notice and have a lien release for each sub-contractor as well as material supplier.
Tip #4 Paperwork. Keep a good file with all of your paperwork. All receipts, bills, the contract, copies of the building permit(s), etc. If it pertains to your job, no matter how insignificant you think it is, keep it!