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Hire a contractor the way the Federal Trade Commission describes: verify the license and insurance, get several written estimates that describe the work and materials, sign a contract that names the contractor, the dates, the payment schedule, the permits, and the change-order process, pay in stages tied to completed work, and hold the final payment until the job is done and the subcontractors and suppliers have signed lien releases. It sounds like a lot. It is one afternoon of paperwork, and it is the difference between a project and a lawsuit.
This post is the FTC's guidance applied to a homeowner's project, with the parts of a quote explained. Where a state has its own rules (licensing, deposit limits, cancellation rights), the state consumer protection office is the source; the FTC's page points there.
What should you do before you call anyone?
Write down what you want done, in a paragraph, with the outcome you expect. "Replace the roof" is a different job from "replace the roof, the underlayment, the flashing, and the two rotted deck sections, and haul away the old material." The more specific your description, the more comparable the estimates will be.
Then find candidates the FTC way: recommendations from people you trust who had similar work done, review sites you trust read with a critical eye, and a search for the company name with "complaint" or "scam". Check how long they have been in business.
How do you check a contractor?
The FTC's guidance on avoiding home improvement scams says to consider only licensed and insured contractors, verifying the license with the state or county and asking for proof of insurance; to get multiple written estimates that describe the work, materials, completion date, and price; and to read the contract carefully before signing. It lists the warning signs: a contractor who knocks on your door, has materials left over from another job, pressures you for an immediate decision, wants cash or full payment up front, asks you to get the permits, or offers financing through a lender they know.
Ask for the license number and look it up on the state or county licensing site; confirm it is current and in the contractor's name. Ask for a certificate of insurance showing general liability and workers' compensation, and call the insurer to confirm it is active. A contractor without workers' comp means an injured worker may claim against you. Ask how many projects like yours they completed in the last year and for references from two of them; call the references.
How do you read a quote?
Get at least three written estimates for the same written scope and compare them line by line, not by the bottom number: the scope, the named materials, the allowances, who does the work, permits, cleanup, schedule, payment terms, warranty, exclusions, and how long the price holds. A quote far below the others is missing one of those, and the FTC says to ask which.
| Part of the quote | What to look for |
|---|---|
| Scope of work | Does it match your paragraph? Is anything you asked for missing, or added? |
| Materials | Named products with brand, model, grade, color; not "standard shingles" |
| Allowances | A dollar figure for items chosen later (tile, fixtures). Low allowances make a quote look cheap and cost more at selection time |
| Labor and subcontractors | Who does the work; whether subs are used and whether they are insured |
| Permits and inspections | Who pulls them and whether the fee is included |
| Demolition, disposal, and cleanup | Included or extra; the FTC suggests a "broom clause" |
| Schedule | Start and completion dates, and what happens if they slip |
| Payment schedule | Deposit, progress payments tied to milestones, final payment on completion |
| Warranty | Workmanship warranty length and terms, and who honors materials warranties |
| Exclusions | What is not included (repairing what is found behind the wall, painting, landscaping repair) |
| Price validity | How long the quote holds |
A quote far below the others is missing something: scope, materials quality, insurance, or permits. The FTC says not to automatically choose the lowest bidder and to ask for an explanation of large differences. Ask.
What should the contract include?
The contract should name the contractor with address, phone, and license number, give start and completion dates, set the payment schedule, obligate the contractor to get permits, say how change orders are handled, list the materials in detail, state the warranties, spell out cleanup and protection of the house, include every verbal promise, and note your three-day right to cancel if you signed at home. That is the FTC's list, and it has no blank spaces.
- The contractor's name, address, phone, and license number
- An estimated start and completion date
- The payment schedule for the contractor, subcontractors, and suppliers
- The contractor's obligation to get all necessary permits
- How change orders are handled (a written authorization for any change to the work, cost, or schedule)
- A detailed list of materials with color, model, size, and brand, and who chooses anything left open, with its allowance
- Warranty information for materials and workmanship, with who honors each and for how long
- What the contractor will and will not do (cleanup, hauling, protecting the rest of the house)
- Every promise made in conversation, written in
- A statement of your right to cancel within three business days if you signed at your home rather than the contractor's place of business
- No blank spaces
How should you pay?
Limit the deposit (some states cap it), tie each progress payment to a defined amount of completed work, never pay ahead of the work, and pay by check or card so there is a record. Hold the final payment until the job matches the contract, the permits are closed, you have the warranties and manuals, and every subcontractor and supplier has signed a lien release.
- DepositLimited; some states cap it, and the state consumer agency knows the number
- Progress paymentsEach tied to a defined amount of completed work, never ahead of it
- Final walkScope met, permits closed, warranties and manuals in hand
- Final paymentOnly after lien releases from the contractor, every sub, and every supplier
Some states cap the deposit, and the state consumer agency knows the number. Before the final payment: walk the job against the scope and the contract, confirm the permits are closed with a final inspection, get the warranty documents and the manuals for anything installed, and get lien releases from the contractor and from every subcontractor and supplier. The FTC's advice is not to make the final payment or sign a final release until you are satisfied and the subs and suppliers are paid.
How do you keep the record?
The FTC says to keep every document in one place: the contract, change orders, correspondence, and a record of every payment, plus a log of conversations and photos as the work progresses. That is also exactly what the home record needs: the project's before and after photos, the invoices (which the IRS wants for improvements that affect your basis), the permit, the warranty, and the contractor's contact for the next time. The single-record post makes the case; in Property Station the Projects area and the Document Vault hold it, and the contractor goes under Trusted Vendors.
Common questions
How big a deposit is normal?
The FTC notes that some states limit the down payment a contractor can request, and advises limiting it and making payments contingent on completed work. A modest deposit to cover ordered materials is common; a request for most of the price up front is a warning sign the FTC lists specifically.
What is a lien release and why does it matter?
A document from the contractor, each subcontractor, and each supplier saying they have been paid for the work. Without it, an unpaid sub or supplier can in many states file a mechanic's lien against your home even though you paid the contractor. The FTC advises getting lien releases before the final payment.
Do I really need a permit for a small job?
The FTC says most states and localities require permits for building projects, even simple ones like decks, and that a competent contractor gets the permits. A contractor who asks you to pull the permit is on the FTC's list of warning signs. Unpermitted work also surfaces at resale, when the inspector or the appraiser asks.
What should you do next?
Write the one-paragraph scope before you call anyone. Then, if the project came out of an inspection, how to read that report will tell you which items belong in the scope and which can wait.