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8 Tips for Selecting a General Contractor

Russell Barneson

Whether you’re remodeling your kitchen, adding a bedroom, or building a second story – you should consider the help of a general contractor.

A contractor is a company or person that completes construction, repairs, or other work for you.

Some contractors specialize in smaller jobs like tiling or painting while others will take on any job they can. 

Selecting a general contractor for a construction project is an important yet challenging decision for real estate investors.

Contractors are notorious for going over budget and not meeting deadlines, causing investors to lose money. 

To increase the chances of your project being successful, here are 8 tips for selecting a general contractor that will result in your project being completed on time, within budget and with maximum results.

1. Leverage Your Network

Any time you're considering hiring a new general contractor, ask for references from veteran real estate industry professionals.

Specifically, consider contacting the following groups to find the perfect general contractor;

Family and Friends
While you would trust family or friends to refer a babysitter or restaurant, when it comes to a contractor, sometimes they have only completed one or two projects, making their recommendation not as bullet proof as it could be. 

Real Estate Lawyer
Real estate attorneys are well versed at dealing with contractors since they often draft home improvement contracts for their clients, making them a great resource for finding a great general contractor. 

Real Estate Broker
Some brokerage companies offer a full service that not only includes assisting in the sale of the home but also in acting as your renovation architect. 

Hard Money Lender
It’s in a hard money lenders best interest to have their clients succeed in order to avoid foreclosure, therefore you can count on them to make a good recommendation. 

Angie’s List and Yelp
Online review sites can be helpful but be wary of fake reviews. 

Social Media
Today's social media landscape offers many networking opportunities to connect with others in your field. Look up local business groups on LinkedIn and attend local networking events. 

Better Business Bureau
The BBB not only provides consumer complaints about individuals and companies, it also has a free online directory of general contractors to select from.

Building Inspector
Building inspectors have knowledge of which home renovation companies consistently meet regulations, these are the contractors you want to be doing business with. 

Local Real Estate Investor Associations
Perfect place to meet with fellow real estate investors like yourself.

One of the best referrals a homeowner will get for a fix and flip general contractor is from someone who does fix-and-flips for a living.

Local Lumberyard
One of the best ways to find reputable contractors is to approach your local lumberyard. 

As it sees many contractors come through its doors, it may be able to recommend professionals who purchase quality materials work and make their payments on time.

2. Get Multiple Estimates

A general contractor should be able to give you an "as built" cost for your project. 

By comparing multiple quotes from various contractors, you'll have a better idea of what the project is likely to cost and how realistic it is that your budget will cover it. 

Don't commit to a general contractor until you have researched their work and viewed samples, if possible.

Be sure everyone bidding understands exactly what your expectations are so there are no surprises.

For larger projects or multi-phase projects, get at least three bids from contractors who specialize in each aspect of the project (foundation, framing, plumbing, electrical).

Some general contractors may not be licensed to address all aspects of your project, and will therefore hand off certain work like excavation to a different subcontractor.

Clarify which aspects of the job will be completed by the contractor and which will be subcontracted out.

3. Hire Local, Licensed Contractors

If you're hiring a general contractor, make sure they are licensed and insured.

State licensing is regulated by the department of insurance in each state.

You'll want to confirm that their license has not been revoked, suspended or denied and verify the amount of liability insurance coverage they carry (usually at least $1 million). 

Also, these factors will help you determine whether or not a contractor is worth your time and money:

  • Education – How many years of experience do they have? Are they certified?
  • References – Can you contact previous clients for references?
  • Support Services – Do they have project managers, schedule planners and other support services or will you need to hire subcontractors yourself?

Larger general contractors with their own employees and support services can help reduce the risk of a construction project failing due to human error and faulty management. If your budget allows it, it is well worth the extra cost.

If the job entails a great deal of work by specialized subcontractors (i.e., plumbers, electricians) who are not employees of the general contractor, see how many years they've been in business. 

Review their references to determine if the quality of their work matches what they say they can provide.

4. Create a Contract

To avoid any misunderstandings, always get estimates in writing and never let work begin without a written contract signed by both parties.

Resist pressure to sign before you are ready and ensure  you read everything thoroughly and understand the terms.

Be sure the contract contains the information of both parties, beginning and completion dates, a comprehensive description of work to be done, material costs and how payments will be made.

Include the party responsible for obtaining necessary building permits and who is in charge of clean-up costs.

It should also spell out your rights as a homeowner to end the agreement if problems arise or if things go over budget – an important provision that often gets overlooked.

If any verbal promises are made, they should be included in the contract.

Agree upon what work will be subcontracted and collect info on the various subcontractors. 

Never sign an incomplete contract or one with any blank pages.

5. Review Past Work

Most importantly check their past work before signing anything or giving them money.

Visit some of the job sites where your contractors have worked before to see their quality first hand.

Contractors who have done good jobs for past clients usually are happy to give out references and phone numbers of previous customers. 

Go ahead, call them! 

You should be able to confirm that they were satisfied with the work done. 

Has the contractor been sued in the past for doing bad work? If yes, how often? And how was the issue resolved?

6. Check Insurance and Bonding

Most importantly, be sure to verify their insurance and bonding. 

Ask for a copy of the bong certificate before you hire any general contractor or subcontractor.

For further assurance that your general contractor will live up to his promise, ask what kind of liability insurance he has – and get the name of his carrier.

If he doesn't have enough - find someone who does. 

With the high cost of lawsuits today nobody can afford not to be fully insured.

7. Don't Pay Up-Front

It's a good idea to pay as work is completed, rather than in advance.

Some contractors may ask for an upfront fee. It can be a good sign of professionalism if they do so; but some unscrupulous contractors will take your money and then walk away from the job.

It’s best to stagger payments so the final payment is not due until the work is complete and you are fully satisfied with the product.

Never pay with cash. Checks should be made to a company rather than the individual.

Using a credit card for part of the payment is a good idea in the event that the job is not completed as specified in the contract, this provides some form of recourse.

Upon completion of the project, request a receipt marked “Paid in Full.” 

Keep this receipt and your contract in case any issues down the line with the work completed. 

8. Red Flags

You want to be able to have complete trust in your contractor, therefore it's crucial to do a background check on them.

You can find customer reviews by searching the company name along with "complaint," "review", or "scam" to see what others are saying.

Ask the company whether it ensures employees and subcontractors are thoroughly investigated via background checks.

The Bottom Line

General contractors can be an amazing asset to your home improvement project. 

They are trained to build and design a house in the most efficient way possible while keeping costs low. 

To find one you need to know where to look and question thoroughly their current and previous jobs before extending them an offer. 

Be careful, there are a lot of bad contractors out there.

But if you follow the above tips, I'm sure you will be able to pick a qualified general contractor for your home improvement project.

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Disclaimer: Crescent Lenders, DBA CrescentLenders.com ("CL") is a California licensed broker under California Bureau of Real Estate License No. #01792267. Regardless of this license, CL considers itself a “finder” for purposes of applicable laws and regulations (California Business & Professions Code § 10130, et. seq.).