Hiring a contractor goes wrong in predictable ways — and almost all of them can be prevented before work starts. Follow this 12-step checklist: verify the license and insurance yourself, get everything important in a written contract, tie payments to completed work (never pay in full upfront), and check real references. It takes a few extra days up front and can save you thousands of dollars and months of stress.
Before You Sign Anything
Step 1: Define the Job in Writing
Write down exactly what you want done, room by room: materials, finishes, fixtures, and what is not included. Vague scope is the number one source of disputes and change orders. A one-page description you hand to every bidder also makes quotes comparable — three prices for three different versions of a job tell you nothing. For cost expectations before you start, see our roof replacement cost guide and our other guides in Cost Guides.
Step 2: Get at Least Three Bids
Three itemized bids is the standard advice because it works. You will learn the market price, spot the outlier (high or low), and learn something from each contractor’s questions. If you do not know where to find reputable local companies, a matching service can generate initial options — then run every candidate through the rest of this checklist anyway.
Step 3: Verify the License Yourself
Most states and many cities license contractors, and trade work like electrical, plumbing, and HVAC almost always requires one. Do not rely on a license number printed on a card or truck. Look it up on your state licensing board’s website and confirm:
- The license is active and matches the business name
- It covers the type of work you are hiring for
- There are no serious complaints or disciplinary actions
An unlicensed contractor is not automatically dishonest, but you lose most of your legal and regulatory protection if something goes wrong — and your homeowners insurance may not cover damage from unlicensed work.
Step 4: Verify Insurance — Both Kinds
Ask for certificates of general liability insurance and workers’ compensation insurance, and call the insurer or check the certificate dates to confirm coverage is current. This matters more than most homeowners realize: if an uninsured worker is injured on your property, or an uninsured contractor damages your home, the financial problem can become yours. Certificates should come from the insurance company, not just as a photocopy the contractor hands you, for any large job.
Step 5: Check References the Right Way
Ask for three recent clients with similar projects — and actually call them. Useful questions:
- Did the project finish on budget? If not, why?
- Did the crew show up when promised and keep the site clean?
- How were problems and surprises handled?
- Would you hire them again for the same job?
Online reviews help, but weight patterns over individual raves or rants, and be suspicious of a profile with nothing but five-star reviews posted in the same month.
Step 6: Confirm Who Handles Permits
For structural, electrical, plumbing, HVAC, and most exterior work, permits and inspections are usually required. Your contract should state that the contractor obtains permits in their name. A contractor who suggests skipping permits “to save money” is asking you to accept the risk — unpermitted work can surface when you sell the home, and it is a serious red flag.
The Contract and the Money
Step 7: Get a Real Written Contract
Handshake deals and one-line invoices are fine for a $200 repair. For anything larger, insist on a written contract that includes:
- Full scope of work and materials, with brands/model numbers where they matter
- Total price and what triggers extra charges
- Start date and estimated completion date
- Payment schedule tied to milestones (see Step 8)
- Warranty terms for labor and materials
- A change-order process: no extra work without a signed, priced change order
- Cleanup and debris removal responsibilities
If a term was promised verbally — a finish date, a specific product, a warranty — it does not exist unless it is in the contract.
Step 8: Follow Safe Payment Rules
Never pay in full upfront. A reasonable structure for a mid-size project:
| Stage | Typical share |
|---|---|
| Deposit at signing | 10% (or materials cost for small jobs) |
| Progress payment at a defined midpoint (e.g., rough-in complete and inspected) | 30–40% |
| Further progress payment near completion | 30–40% |
| Final payment — only after the walkthrough, punch list, and final inspection | 10–20% held until the end |
Some states cap deposits by law. Pay by card or check, never cash, so there is a paper trail. The final payment is your leverage to get the last details finished — once it is gone, so is most of your leverage. Be equally wary of the opposite extreme: a bid requiring 50% or more before work begins is one of the classic warning signs in Step 11.
Step 9: Agree on Communication and Site Rules
Before work starts, settle the practical details: who is your daily point of contact, work hours, where materials and a dumpster go, bathroom access for the crew, and how you will be updated. Most day-to-day frustration comes from mismatched expectations here, not from workmanship.
Step 10: Do a Final Walkthrough Before Final Payment
Walk the finished job with the contractor, test everything (run the water, flip the switches, open and close the doors), and write a punch list of anything incomplete or wrong. Final payment happens when the punch list is done, final inspections are passed, and you have received warranty documents and, for larger jobs, lien waivers from the contractor and major subcontractors confirming everyone has been paid.
Red Flags at Any Stage
Step 11: Know the Warning Signs
Walk away — or at minimum slow down — if you see:
- “Today only” pricing or high-pressure signing tactics
- A demand for full payment, or a large deposit, in cash
- No written contract, or a contract with blank spaces
- No verifiable license or insurance, or resistance to providing them
- A quote dramatically lower than every competitor (the money comes back as change orders or shortcuts)
- Requests that you pull the permits in your name
- A P.O. box only, no physical address, and no verifiable local history
Step 12: Keep a Project File
Keep the contract, change orders, permits, inspection reports, receipts, warranty documents, and photos of progress in one folder. If you ever have a dispute, a warranty claim, or a home sale, that file is your proof of what was done, by whom, and to what standard.
FAQ
How much deposit is normal for a contractor?
Around 10% is typical for established companies on mid-size jobs, though some states set legal caps. Small jobs may require materials money. More than a third before work starts deserves serious scrutiny.
What if my state does not license my type of contractor?
Some categories, like general handyman work, are unlicensed in many states. Then weight insurance, references, and reviews more heavily, keep the first job small, and still use a written agreement and safe payment terms.
Should I tell contractors my budget?
Share a realistic range once you have their initial read on scope. It helps them propose options that fit, but get their itemized pricing in writing regardless.
What is a lien waiver and why do I want one?
It is a signed statement that the contractor (and ideally their subcontractors and suppliers) has been paid and waives the right to place a lien on your home for that work. Collect them with final payment on larger projects.
The Bottom Line
Good contractors welcome this checklist — licenses, insurance, written contracts, and milestone payments are how professionals already work. The steps that protect you only scare off the contractors you should not hire anyway. Take the few extra days to verify, and compare at least three quotes before you hire.