How to Hire a Contractor Without Overpaying or Getting Stuck With Bad Work

Start with references and a written scope of work

Before you call anyone, write down exactly what needs to be done. "Fix the bathroom" is not a scope of work. "Replace the toilet, caulk around the tub, and repaint the walls" is. A contractor needs this specificity to give you an honest price, and you need it in writing so there is no argument later about what was supposed to happen.

Ask for at least three references from work completed in the last two years — not just names, but actual people you can call. When you call them, ask whether the work came in on time and on budget, whether the contractor cleaned up after, and whether they would hire them again. A contractor who cannot produce three recent references is a risk.

Check that the contractor holds a current license in your state and that their license is in good standing. Most states have an online lookup tool on the contractor licensing board website. A license does not may provide good work, but the absence of one means they are operating illegally and you have no recourse if something goes wrong.

Key Takeaways

• Get a written scope of work before calling anyone — the more specific you are about what needs doing, the more accurate the price will be.
• Call at least three recent references and ask whether the work stayed on budget and schedule, because that is what matters most.
• Verify the contractor holds a current license in your state and check for complaints on the licensing board website.
• Get written estimates from at least three contractors and ask what is included and what costs extra before you sign anything.
• Never pay the full amount upfront — most states cap how much a contractor can collect before work begins, usually 10 to 50 percent of the total.

Get written estimates and compare what is actually included

Call at least three contractors and ask them to visit the site and provide a written estimate. A real estimate takes time — if someone quotes you over the phone without seeing the work, they are guessing. The estimate should list every material, every task, and the labor cost for each one. If it says "labor: $2,000" with no breakdown, ask them to itemize it.

When you have three estimates, do not automatically pick the lowest. Instead, compare what each one includes. One contractor might be charging less because they are using cheaper materials or because they have not included something you thought was part of the job. Call each contractor and ask why their price differs from the others. A contractor who can explain the difference clearly is more trustworthy than one who just undercuts without explanation.

Look for estimates that are close to each other. If two are around $5,000 and one is $2,500, the low bid is either missing something or the contractor is cutting corners to make money. Ask the low bidder what they are leaving out.

Verify insurance and check for complaints

Ask each contractor for proof of liability insurance and workers' compensation insurance. Liability insurance protects you if they damage your home or someone gets hurt. Workers' compensation protects their employees — if they do not have it and an employee is injured on your property, you could be sued instead. Ask to see the actual certificate, not just their word that they have it.

Check the state licensing board website for complaints against each contractor. Most boards post complaint histories and how they were resolved. A contractor with no complaints is rare, but one with many unresolved complaints is a warning sign. Also search the contractor's name online — Google, Better Business Bureau, and local review sites will show you patterns if they exist.

Understand what you will pay and when

Most states have laws limiting how much a contractor can collect before work starts. The limit varies — some states cap it at 10 percent of the total, others at 50 percent — but nearly all require that the bulk of payment come after the work is done. Check your state's contractor laws to know what is legal in your area.

A typical payment schedule looks like this: 25 to 50 percent when you sign the contract, another 25 to 50 percent at a midpoint (for example, when framing is done but before drywall), and the remainder when the work is finished and inspected. Never pay the full amount upfront. If a contractor demands it, walk away.

The contract should also specify what happens if the work is not finished on time or if the contractor abandons the job. Some contracts include a daily penalty if the work runs past the agreed end date. Others do not. Discuss this before you sign.

Get everything in a signed contract

The contract is your only protection if something goes wrong. It should include the scope of work (the detailed list you wrote), the total price, the payment schedule, the start and end dates, and what happens if either of you breaks the agreement. It should also say who is responsible for obtaining permits and who pays for them.

Do not sign a contract that is blank or vague. If the contractor hands you a one-page form with empty lines, ask them to fill it in completely before you sign. A contractor who refuses to put terms in writing is someone to avoid.

Keep a copy of the signed contract, the estimates, the insurance certificates, and the license verification in a folder. If a dispute arises later, you will need these documents.

Communicate clearly during the work and document everything

Once work begins, check the site regularly — at least once a week for jobs lasting more than a week. Look at the quality of the work, whether the site is being kept clean, and whether the contractor is on schedule. If you see a problem, photograph it and tell the contractor in writing (email or text) what needs to change. Do not rely on verbal conversations alone.

If the contractor wants to change the scope of work — add a task, use different materials, or extend the timeline — get the change in writing before they do the work. A verbal agreement to "just add this one thing" often leads to surprise bills later.

When the work is finished, do a final walkthrough with the contractor before you make the last payment. Check that everything on the contract was completed, that the site is clean, and that any warranties or guarantees are documented in writing. Only then should you pay the final amount.

Know your options if something goes wrong

If the contractor does not finish the work, does poor-quality work, or abandons the job, your first step is to send a written notice (email or certified letter) describing the problem and giving them a deadline to fix it — usually 10 to 30 days depending on your state. Keep a copy of this notice.

If they do not respond or refuse to fix it, you can file a complaint with the state licensing board. The board can investigate and, in serious cases, suspend or revoke the license. This does not get your money back, but it prevents them from doing the same to someone else.

If you have already paid and the work is not done, you may be able to withhold the final payment or file a claim in small claims court. Some states also have contractor recovery funds — pools of money that pay homeowners when a licensed contractor fails to complete work or commits fraud. Check your state licensing board website to see if one exists.

Frequently Asked Questions

Should I hire a contractor who does not have a license?

No. An unlicensed contractor is operating illegally in most states, and you have almost no recourse if they damage your home or disappear mid-job. If something goes wrong, you cannot file a complaint with the licensing board because they are not licensed. Stick with licensed contractors.

What if the contractor wants a large deposit upfront?

Check your state's contractor laws — most cap the upfront deposit at 10 to 50 percent of the total. If a contractor is asking for more than the legal limit, that is a red flag. If they are asking for the legal limit but you are uncomfortable with it, get a second opinion from another contractor or ask the licensing board what is typical in your area.

Can I use a contractor who does not have references?

It depends on the job. A new contractor with no local references is riskier than an established one, but not impossible to work with. If you do hire someone new, ask for references from their previous employer or training program, require a smaller upfront payment, and consider starting with a smaller job to test their work before committing to a larger one.

What should I do if the contractor finds extra work that needs doing?

Ask them to describe it in detail and provide a separate written estimate for the additional work before they do it. Do not let them add work and bill you later. If the extra work is urgent and you cannot wait for a written estimate, agree on a price in writing (email counts) before they start, and make sure the contract is updated afterward.

Do I need to get a permit for the work?

It depends on the type of work and your local building code. Electrical, plumbing, and structural work usually require permits. Painting and minor repairs usually do not. Ask your contractor whether a permit is needed, and make sure the contract specifies who obtains it and who pays the permit fee. If a contractor says a permit is not needed when one actually is, that is a serious problem.