How to Find a Good Contractor: 10 Tips to Avoid Bad Ones

Tip 1: Start With Referrals, Not Search Results

The single most reliable way to find a good contractor is a personal referral from someone who recently completed a similar project. Not a five-year-old referral. Not a referral for a different trade. A recent referral for the same type of work you need done.

The reason referrals work: you get an unfiltered first-hand account of the entire project experience — communication, schedule adherence, budget discipline, quality, and how the contractor handled problems. Online reviews, even legitimate ones, cannot replicate this. Ask neighbors who recently completed a remodel, your real estate agent (who sees the aftermath of hundreds of contractor jobs), or your building department inspector (who literally sees the quality of work before walls close up and is often willing to mention contractors whose work they consistently approve without re-inspection). These are the insider networks most homeowners never tap.

After referrals, useful secondary sources include: your local NAHB Home Builders Association chapter directory (members have agreed to the NAHB's code of ethics), your state licensing board's active license directory (search by trade and city), and local independent lumberyards and supply houses (they extend credit to contractors and know which ones run organized operations vs. chaos). General Google searches and lead-generation sites (Angi, HomeAdvisor, Thumbtack) are useful for generating a list, but they require additional vetting — these platforms charge contractors for leads, so they attract volume-focused contractors, not necessarily quality ones.

Tip 2: Verify the License Directly — Not From a Card

Per the NAHB, approximately 30% of contractors operating in the U.S. are unlicensed. In some states (California, Florida, New York, Texas), unlicensed contracting is a criminal offense. In others, licensing requirements vary by trade and project value. Regardless of your state's enforcement, hiring an unlicensed contractor creates significant risk:

• Homeowner's insurance may not cover work-related injuries to unlicensed contractors on your property — exposing you to personal liability.
• Work performed without required permits by unlicensed contractors may not be recognized by your insurer in a claim, or may require removal and replacement at your expense.
• Unlicensed contractors cannot legally pull permits in most jurisdictions — meaning the work proceeds without inspection, without any verification of code compliance.
• Recovery of funds from an unlicensed contractor through your state's contractor recovery fund (most states have one) may not be available for work performed without a license.

How to verify: every state with contractor licensing maintains a public online database. Search "[your state] contractor license lookup" — the official state government site will appear. Enter the license number the contractor provides. Confirm: the license is active (not expired or suspended), the name on the license matches the contractor's legal business name, the license type covers the work being done (general contractor, electrical, plumbing — these are separate licenses in most states), and there are no disciplinary actions or consumer complaints on record.

Never accept a photocopy of a license card, a PDF license, or the license number by phone as sufficient verification. Take 90 seconds to run it yourself in the state database.

Tip 3: Demand a Certificate of Insurance — The Right Way

A contractor working on your property without adequate insurance exposes you to potentially catastrophic liability. The coverage you need to verify:

• General liability insurance: Covers damage to your property caused by the contractor's work. Minimum $1 million per occurrence for residential work; $2 million for larger projects. This is what pays if the contractor's crew puts a sledgehammer through a gas line.
• Workers' compensation insurance: Covers medical expenses and lost wages for the contractor's employees if injured on your property. Without it, an injured worker can sue you directly as the property owner — even if you had nothing to do with the incident. Note: workers' comp is not required for solo contractors with no employees in most states, but as soon as they bring a crew, it is required.
• Vehicle/equipment coverage: Less critical but confirms the operation is professionally run.

The critical procedural point: ask the contractor to have their insurer email the Certificate of Insurance (COI) directly to you. Do not accept a COI that the contractor hands you, emails you, or includes in their bid packet. Insurance certificates are easy to alter, and this is a known fraud technique — a contractor shows an expired or falsified COI, you accept it, and you are unprotected when something goes wrong. When the COI comes directly from the insurer, you know it is authentic.

Tip 4: Get Three Bids and Learn Why They Differ

The rule of three bids is standard advice, but most homeowners apply it incorrectly — they compare the bottom-line numbers and choose the lowest. The number itself tells you almost nothing without understanding what is behind it.

The right way to use three bids: ask each contractor for an itemized scope of work, not just a total price. Then compare line by line. If Contractor A at $45,000 includes all permits, a project manager on-site daily, and brand-name fixtures, while Contractor B at $38,000 has excluded permits and specified builder-grade substitutes, the actual comparable price for Contractor B's scope may be $43,000 — and you have a much clearer basis for comparison. For more detail on project budgeting, see our home renovation cost guide.

Tip 5: Check References — and Actually Inspect the Work

References are not a formality. Every contractor will give you three references — those three have been carefully curated to be their most satisfied clients. The challenge is extracting useful information from a prepared reference. Here is how:

• Ask specifically about problems: "Did anything go wrong, and how did the contractor handle it?" A great contractor has problems on every job — construction is inherently unpredictable. How they handle problems is what distinguishes great from mediocre. A reference who says nothing went wrong is either not being candid or had a trivially simple job.
• Ask about the schedule: "Did the project finish on time? If not, by how much?" The NAHB's 2024 Remodeling Impact Report found that schedule overruns are the most common source of homeowner dissatisfaction — more than cost overruns or quality issues.
• Ask if they would hire them again: This simple question is more revealing than any other. Hesitation before "yes" is informative.
• Ask to visit the completed work: For projects over $20,000, ask the reference if you can visit their home and inspect the work personally. Most satisfied customers will say yes. An in-person inspection tells you more in 15 minutes than a 30-minute phone call — look for consistent finish quality, tight trim joints, proper caulk application, and the small details that separate craftsmen from installers.

Additionally, check the Better Business Bureau for complaints, the state licensing board for disciplinary actions, and search the contractor's company name in your county's court records database. A contractor with multiple small-claims judgments against them — even resolved ones — has a pattern of disputes worth noting. Most county court records are searchable online at no cost.

Tip 6: Never Pay Cash, Never Pay In Full Upfront

Payment structure is one of the most reliable signals of contractor legitimacy. Here is the framework:

• Upfront deposit: 10–15% maximum for mobilization and material ordering. California caps this at $1,000 or 10%, whichever is less. Any contractor requesting more than 20–25% upfront on a residential project does not have the supplier relationships or credit lines of an established operation.
• Progress draws: Tied to specific, verifiable milestones (demolition complete, rough framing complete, rough-in inspections passed, drywall complete, finishes complete). Never pay a milestone draw before the milestone is visibly achieved and inspected.
• Final payment: 10–15% held until final inspection is passed, punch list is complete, all permits are closed, and any required lien waivers are received. Your final payment is your leverage — do not release it until everything is done.
• Payment method: Check or card only. Cash transactions are a red flag for two reasons: no audit trail if a dispute arises, and cash-only contractors often avoid reporting income, which creates issues with their workers' comp coverage (premiums are tied to payroll — unreported workers mean uncovered injuries).

If a contractor says they need more money than the draw schedule to "keep the job going," that is a crisis signal. It means they are using your money to fund another client's job (front-running) or are in financial distress. Do not advance money outside the agreed draw schedule — it puts you in a position where you have paid more than the work value completed, which is exactly where abandonment scams begin.

Tip 7: Read Every Line of the Contract — Including the Exclusions

A verbal promise is worth exactly nothing in construction. Every detail that matters must be in the written contract. Here is what a complete residential construction contract must include:

• Detailed scope of work: Not "kitchen remodel" but specific dimensions, materials by manufacturer and product name, finish specifications, and any work that is explicitly excluded. The exclusions section is where disputes originate — read it more carefully than the scope.
• Materials with specifications: "LVP flooring" is not a specification. "Shaw Floorté Pro Plus, 8mm, Tiffany Oak, with 2mm attached underlayment" is a specification. Vague material descriptions allow substitution with cheaper products after signing.
• Payment schedule: Exact draw amounts, milestone triggers, and any retainage terms.
• Start date and completion date: Both dates should be in the contract. The completion date should include a definition of "substantial completion" (typically when the space is usable and all permit inspections are passed, even if minor punch items remain). Include a liquidated damages clause ($X per day of delay beyond the completion date) for projects where schedule matters.
• Change order process: All changes to the scope, materials, or schedule must be in writing, signed by both parties, with cost and schedule impact stated before work begins. Verbal change orders are a primary mechanism for budget blowouts — "while you're here, can you also..." conversations should always end with a written change order signed before work starts.
• Permit responsibility: Who pulls permits and at whose expense. The contractor should pull permits in their name — this means the work is inspected, and the contractor is on record as the responsible party.
• Lien waiver requirement: Include a provision requiring the contractor to provide conditional lien waivers from subcontractors and material suppliers with each draw payment, and unconditional lien waivers upon final payment. This protects you if the contractor fails to pay their subs — without lien waivers, a subcontractor can place a mechanic's lien on your property even after you have paid the GC in full.
• Warranty terms: Minimum one year for labor defects; manufacturer warranty for materials. The warranty should be in writing, not verbal.

For major projects ($50,000+), consider having a construction attorney review the contract before signing. A $300 attorney review on a $150,000 renovation is cheap insurance.

Tip 8: Require Permits — Even When the Contractor Suggests Skipping Them

"We can skip the permit and save you money" is one of the most common contractor offers that homeowners accept and later regret. Here is why permits exist and why skipping them hurts you:

• Unpermitted work creates title problems at sale: Buyers' agents, home inspectors, and lenders are increasingly flagging unpermitted work at sale. You may be required to either obtain an after-the-fact permit (expensive, requires opening walls for inspection) or disclose the unpermitted work and accept a reduced sale price. A 2024 NAR survey found that 23% of home sales delayed by inspection findings involved unpermitted renovations.
• Homeowner's insurance may deny claims for unpermitted systems: If a fire originates from an unpermitted electrical installation, your insurer may deny the claim — or reduce payout — because the work was not code-compliant. This is particularly significant for electrical and HVAC work.
• Your family's safety depends on inspections: Permits trigger inspections at critical stages — rough-in electrical before walls close, structural framing before sheathing, plumbing rough-in before concrete pour. These inspections catch dangerous errors before they become disasters. A 2025 NFPA report cited unpermitted electrical work as a contributing factor in 11% of residential electrical fires.

If a contractor genuinely believes the work does not require a permit, they should be able to cite the specific code exemption to you. If they just say "we don't need one for this type of work" without specifics, call your local building department directly. They will tell you within five minutes whether a permit is required. See our building permits guide for a state-by-state overview of what typically requires a permit and how to get one.

Tip 9: Recognize the Seven Red Flags That Expose Bad Contractors

These warning signs apply across all trades. Any one of them warrants caution; multiple together are disqualifying:

Tip 10: Know Who Is Actually Doing the Work

General contractors routinely use subcontractors — this is normal and not inherently a problem. The GC coordinates the project, pulls permits, manages schedule, and takes responsibility for the final product. Subs execute specific trade work (plumbing, electrical, tile, HVAC). The question to ask is not "do you use subcontractors" but "who specifically, and can I verify their licenses?"

A GC who uses the same subs on every job, who knows those subs' license numbers from memory, and who stands behind their work as if it were his own crew is using subcontractors correctly. A GC who sources whoever is cheapest available on bid day — often unlicensed day labor disguised as subcontractors — is creating a liability for you.

Ask specifically: "What trades will you subcontract, and can you provide me with the sub's license number for each?" A prepared, professional GC will answer this without hesitation. Evasion or vagueness is informative.

The Contractor Vetting Checklist

Use this checklist before signing any contract for work over $2,500:

When the Lowest Bid Is the Right Bid

I want to be clear about something the above tips might obscure: the lowest bid is sometimes the right choice. Not every low bid reflects cut corners. Some contractors bid lower because:

• They are newer to the business and pricing aggressively to build portfolio — often they are highly skilled tradespeople who recently went independent.
• They have lower overhead (smaller company, no expensive showroom or sales staff).
• They have genuine efficiency from experience — a crew that has done 50 identical bathroom tile jobs does it faster than a crew that does everything.
• They are in a slower period and need the work — a legitimate contractor who is temporarily slow may offer a genuine discount to fill their schedule, not because they will cut corners.

The vetting checklist above screens out fraudulent and incompetent contractors regardless of price point. Once a contractor passes all those checks, price is a valid differentiator. The goal is not to hire the most expensive contractor — it is to hire the right contractor at a fair price. Use our DIY vs. contractor guide to determine whether your specific project needs a licensed pro or is genuinely DIY-appropriate, and use our construction cost calculator to build an independent cost estimate before getting bids — so you know what fair pricing looks like before anyone quotes you.

Frequently Asked Questions