The right way to vet a contractor before signing anything

The right way to vet a contractor before signing anything

License. Bond. Insurance. References. Contract. Five steps that take an afternoon and protect you from the contractor horror stories everyone's heard. Don't skip any of them.

Most contractor disasters start the same way. A homeowner gets a quote that's a little lower than the others, the contractor seems friendly, the start date works, and the signing happens before anyone checks the basics. Six weeks later there's an unfinished kitchen, no contractor, and a fight that ends up in small claims court.

The checklist that prevents most of these stories takes about three hours total. Here it is.

Step 1: Verify the license

Most states require contractors to be licensed for jobs above a certain dollar amount. The threshold varies by state (Texas has no state contractor license for residential work, California requires one for anything over $500, Florida requires one for projects over $2,500). Find your state's rules by searching "[your state] contractor license lookup."

Once you have the license number from the contractor, search your state's licensing board website, verify the license is active (not expired, suspended, or revoked), and confirm the license type covers your project category.1 A general contractor license doesn't always cover electrical or plumbing work. A roofing license doesn't cover bathroom remodels.

Common mistake: assuming a contractor who was licensed when they did your neighbor's job is still licensed now. Licenses lapse. Check before every project.

Step 2: Verify the insurance

Contractors should carry two types of insurance. General liability and workers' compensation. Both protect you, not just them.

General liability covers damage to your property and injuries to non-employees. If a contractor's ladder falls into your living room window or a delivery driver trips on their equipment in your driveway, this insurance pays. Without it, you do.

Workers' compensation covers the contractor's employees if they're injured on your property. Without workers' comp, an injured worker can sue you as the property owner. The settlements run into the hundreds of thousands.

Ask for a Certificate of Insurance (COI) dated within the last 30 days. Verify the named insured matches the contractor's legal business name. Then call the insurance company directly using the phone number on the certificate. Don't trust the contractor to confirm their own coverage.2

Step 3: Verify the bond

A surety bond is different from insurance. It's a financial guarantee that the contractor will complete the work according to contract. If they don't, you can file a claim against the bond and recover money.

Bond requirements vary by state. Washington requires general contractors to carry a $30,000 bond. California requires $25,000. Other states require less or none.

Ask for the bond number and the issuing company. Call the surety company directly to verify the bond is active. The bond expiration date can be separate from the license expiration date, so check both.

Note: most state-required bonds are smaller than you'd expect. A $25,000 bond doesn't cover a $100,000 kitchen renovation gone wrong. Bonds are a partial safety net, not a full one. They're still worth verifying, but don't treat them as complete protection.

Step 4: Check references and reviews

Ask the contractor for three references from projects completed in the last year. Call all three. Don't email. Phone calls get honest answers.

Questions worth asking:

Did the work start on time and finish on time?

Were there change orders, and how were they handled?

Did the contractor stay accessible throughout the project?

Were there any issues, and how were they resolved?

Would you hire them again?

Online reviews supplement but don't replace reference calls. Look at Google, Yelp, and the Better Business Bureau. Read the one-star reviews carefully. One bad review can be a difficult customer. Five bad reviews with the same complaint are a pattern.

Step 5: Get the contract in writing

Never hire a contractor without a written contract. Verbal agreements are unenforceable in most states for projects over $500. A real contract should include:

Detailed scope of work with specific materials and brands

Start date and substantial completion date

Total price and a clear payment schedule

Procedure for change orders (what triggers a price adjustment)

Warranty terms (1-year minimum on workmanship is standard)

Procedure for resolving disputes (arbitration vs. court)

The contractor's license number, insurance, and bond information

Avoid contractors who use a one-page generic contract or who insist on cash-only deals. Both are red flags.

The payment schedule that protects you

Most state laws cap upfront payments for contractor work. In California it's 10 percent of the contract or $1,000, whichever is less. In Massachusetts it's 33 percent. Always know your state's cap.

A reasonable payment schedule for a mid-sized project looks like:

10 percent deposit at signing

25 percent when work starts and materials arrive

25 percent at the rough-in or midway milestone

30 percent at substantial completion

10 percent held back until you confirm punch-list items are done

The final 10 percent retainage is the most important number on this list. It's what gets the contractor back to finish the small fixes after the big work is done.

Seven red flags that mean walk away

First. They ask for a large upfront cash payment. Anything over 30 percent is suspect. Cash-only is almost always a problem.

Second. The quote is dramatically lower than competitors. If three bids come in at $35,000, $37,000, and $18,000, the cheap one is the problem, not the deal.

Third. They knocked on your door or called out of the blue. Legitimate contractors don't door-to-door sell. Storm-chasing roofers and gutter contractors specifically..

Fourth. The contract is vague or hand-written on one page. Real contractors have proper contracts they use for every project.

Fifth. They can start tomorrow. Good contractors are usually booked four to eight weeks out. Immediate availability is a warning.

Sixth. They're pressuring you to sign today. Real bids should be good for at least a week. A signing-today discount is a sales tactic, not a legitimate offer.

Seventh. They want to pull no permits or work without permits. Permits are required for most structural, electrical, plumbing, and HVAC work. A contractor who suggests working without them is exposing you to insurance denials, code violations, and resale problems.

If something goes wrong

Document everything. Photos of work in progress. Texts and emails saved. Receipts kept. Most disputes are settled by who has the better paper trail, not by who's right.

Try direct conversation first. Most contractors will fix legitimate problems when asked clearly.

Escalate to the licensing board next. State contractor boards investigate complaints and can suspend or revoke licenses. Most contractors will quickly resolve issues to avoid that.

Bond claim is the third step for unfinished or defective work. File with the surety company that issued the bond.

Small claims court is the last resort for amounts under $10,000 (the limit varies by state). For larger amounts, a construction attorney is worth the $300 to $500 consultation fee.

What to do next

For your next project, build a three-quote shortlist. Verify license, insurance, and bond on all three before you compare prices. Throw out any quote where the contractor can't provide the documentation in 24 hours.

The three-hour vetting process at the start of a project saves the three-month dispute at the end of one. Worth every minute.

Sources

1. BuildFolio, How to Check Contractor License & Insurance 2026, March 2026. build-folio.com/contractor-guides/how-to-check-contractor-license

2. BuildRated, How to Check if a Contractor Is Licensed, Bonded, and Insured, February 2026. buildrated.com/blog/how-to-check-contractor-licensed-insured

3. Better Business Bureau, Hiring Contractors: Tips and Warning Signs. bbb.org/all/find-trustworthy-contractor

4. Federal Trade Commission, Hiring a Contractor. consumer.ftc.gov/articles/hiring-contractor