Steps for hiring a home contractor

Homeowners looking to remodel may find that prices are attractive, but they should be careful when choosing a contractor.

DES MOINES, Iowa -- Anyone who has ever wanted to remodel a kitchen or a bathroom knows how such projects tend to linger. When times are tight, homeowners often put off renovations as they cut back on anything but necessities.

All told, spending on remodeling and repairs fell to an estimated $280 billion last year. That was down from $326 billion at the 2007 peak, according to the Joint Center for Housing Studies at Harvard. And a languishing housing market will mean a slow recovery.

"There's a huge labor pool out there of people who may be qualified in their particular area, but not qualified to manage or run an entire remodeling project," said Dean Herriges, president-elect of the National Association of the Remodeling Industry. "The market is flooded with people who may think they're capable of doing remodeling projects, but they're not."

The economy has been hard on contractors who saw work dry up.

That has created a lot of eager carpenters, plumbers, drywall installers, and others looking for work. So if you're looking to a contractor you may be able to find an attractive price, but choose carefully.

Here are some key steps to follow in the hiring process.

Obtain referrals: There are several ways to find potential contractors.

Usually the easiest is to begin by seeking recommendations from family members and friends. Tap into social networking sites, such as Facebook, to expand your reach. Keep in mind though that anyone making a personal referral may not have had the same type of work done or a similar budget. Another option is to join a consumer-reviews websites and research contractors there.

Suggestions also could come from local professionals who do business with reliable contractors, including your city's building inspector or a lumber supply store.

Interview candidates: Armed with a list, make some calls to get a sense for how comfortable you'll be with them working in and around your home.

The NARI suggests a list of questions to ask a potential contractor at www.nari.org. They include: How long have you been in business? Who will be assigned as project supervisor for the job and will workers be employees or subcontractors? Does your company carry workers compensation and liability insurance? May I have a list of references from similar projects and a list of business referrals or suppliers?

Avoid red flags: During your search, it's helpful to know a few sure signs of trouble. For example, a contractor offering an extremely low bid signals he's likely cutting costs with cheap material or on labor. Poor quality materials or a contractor rushing to get a project done cheaply will end in disaster.

"You're shopping for a final finished product. That doesn't necessarily mean the lowest price," said Herriges. "You're shopping for value."

Here are a few other red flags from a potential contractor: a request for significant money up front, say more than a third, as that's a sign there may be cash flow issues; a demand to be paid in cash only; no physical business address, just a post office box number; an unsolicited offer that may include a discount.

Narrow the field: From the calls, winnow your choices down to three. Double-check references to make sure past projects were done on time, at the expected price and that the quality and cleanup was satisfactory.

After all of the background checks, set up face-to-face meetings with those who pass your initial screen to discuss your project and get written estimates. Make sure to ask for an estimate that breaks down material and labor costs so you'll be able to make specific service comparisons.

Finalize the deal: Get an agreement in writing. A formal contract will provide protection in case something goes wrong.

For instance, problems may arise if the contractor doesn't pay his suppliers. If he still owes money on the material or labor used in your project, you'll want to have a lien waiver in place. This prevents a lumber company or subcontractor from placing a lien on your home for the contractor's unpaid bills.

Also ask for a certificate of insurance proving the contractor has liability and workman's compensation insurance.

The contract should include details of a beginning date, a completion date, and how payments will be made. It's typical to pay a third up front, a third when the project is half done and the final third once the job is done and meets your expectations.