We don’t usually think about financial risks when planning a home repair or remodeling project. Yet each year L&I hears from hundreds of homeowners who have fallen victim to contracting scams. Here are the basic steps you should take before you hire a contractor:

• Plan your project
• Get bids and interview your contractors
• Verify your contractor
• Watch for warning signs of a scam

Plan Your Project

If you know what you want done and can clearly explain it, you’re less likely to encounter problems. You should know your budget and have a clear idea about what you would like to do, versus what you need to do.

• Review our What You Should Know About Hiring a Contractor, Remodeler, or Handyman (F625-084-000) publication to better understand contractors registration requirements in Washington.

Get bids and interview your contractors

Before selecting a contractor, you should interview several qualified, registered contractors/remodelers and get your bids in writing. You should evaluate all aspects of your bids, including the scope of work, warranties, references, completion dates, and price. Focusing only on price may get you a less than desirable result.

You can get recommendations from trusted friends, work colleagues, insurance brokers, real estate agents, and local homebuilder associations. Internet sites may or may not be a reliable source of recommendations. Verify your references. If possible, request to view your contractor’s work, interview another homeowner, or visit a site with work in progress.

• You can print our Hire Smart Worksheet (F625-111-000) to help walk you through this process.

Verify your contractor

There are many tools that can help you decide whether a contractor is right for your project. Using L&I’s Verify tool to verify a contractor’s registration helps you ensure they are bonded, have liability insurance, and no outstanding infractions. You can find your contractor’s registration number in their advertisements and on your written bid. The law requires a contractor’s registration number to be included in all advertisements, including business cards and internet advertisements.

If contractors have other workers or employees on your job-site, they must have a workers’ comp account that is active and up-to-date. You can verify workers’ comp coverage when you use L&I’s Verify tool. You could be a financial risk if someone is injured while working on your project if you haven’t verified that your contractor has workers’ comp coverage.

Note: Contractors who are not using other workers or who do not have employees (owner-operators, sole proprietors, etc.) are not required to have workers’ comp accounts.

Watch:  Verify a Contractor for Consumers.

You may also check out a contractor's online reputation, with:

Office of the Attorney General
www.atg.wa.gov/safeguarding-consumers
TDD users call: 1-800-533-5384
Consumer Resource Center: 1-800-551-4636

Better Business Bureau
www.bbb.org
Western Washington: 206-431-2222
Eastern Washington: 509-455-4200

Watch for warning signs of a scam

• Provides a credential or reference that can't be verified.
• Offers a special price only if you sign today, or use high-pressure sales techniques.
• Only accepts cash, require large deposits or the entire cost up-front, or asks you to make the payment in their name rather than their business name.
• Does not provide a written contract or complete bid.
• Asks you to get the building permit. In most instances, if you have hired a contractor, the contractor is required to take out the permits. Permits are for your protection and help to ensure that work will meet local building codes.
• Offers exceptionally long warranties.
• Wants to do most or all of the work on weekends and after hours.
• Gives you an offer that sounds "too good to be true."

Report fraudulent contractors online, or by calling 1-888-811-5974.

The better you can communicate to your contractor what you need, there is less chance for miscommunication or cost overruns. Here are some basic steps to take before you hire a contractor:

• Compare bids carefully
• Get a written contract
• Protect your investment
• Understand possible liabilities

Compare Bids Carefully

While cost is important, it’s not the only thing to consider when comparing bids. Review and compare start and end dates, the products to be used, and the warranties offered. You should also verify that all permit fees, taxes, and other costs are included in the bid.

• You can print our Hire Smart Worksheet (F625-111-000) to help walk you through this process.

Get a written contract

Be sure you read and understand everything in your contract before you sign. For large projects, you may want to seek legal advice.

All contracts should include, at a minimum:

• Price, including sales tax.
• Payment terms, such as paying as work is completed and completion date.
• Permit fees, if applicable.
• The specific work to be performed.
• A list of materials, major suppliers, and subcontractors to be used.
• Warranties and processes for change orders.

Make sure you receive the legally required Disclosure Statement Notice to Customers before work begins. This document also explains the potential of liens against your property. See "Understanding possible liabilities" below.

Working with subcontractors and suppliers

Your contractor may choose to subcontract portions of your project to different individuals or companies. You should ask for a list of companies and suppliers that your contractor will be using. As a financial protection, you may want to make arrangements to pay these subcontractors and suppliers directly.

Protect your investment

If your project costs more than $6,000, consider asking your contractor to post a performance bond for the project. A performance bond insures the property owner for the entire value of the project if problems arise. There may be a fee for this, but on large projects, it may be worth the extra expense.

You can withhold a portion of your payment until you are satisfied with the work. Any payment arrangements should be written into your contract, and you should request a receipt for all payments. Besides a reasonable down payment, you should pay your contractor only when specific phases of a project are completed – don’t pay simply because you agreed to pay by a specific date. When advancing money for materials, ask to make checks payable to both the contractor and the supplier.

Avoid paying for your project in full until all work is completed and you are satisfied with the work. Be wary of contractors who insist on payment only in cash or who request payment for work that has not been finished or passed inspection.

Learn about permits and inspections

Permits and inspections ensure that vital functions of your building meet the applicable codes. This includes building codes, electrical codes, plumbing codes, etc. Do not allow permits and inspections to be overlooked – they are for your safety. Make sure your contractor requests the required inspections before the work is covered up. Inspectors need to be able to see the work they are inspecting, and it may cost additional time and money to uncover pipes or wiring that are not visible.

Building and plumbing permits

Building and plumbing permits are issued by the county or city where your project is located. Contact your local county or city building department for details.

Electrical permits

L&I issues electrical permits and performs inspections in many areas around the state, but some cities and Tacoma Power handle their own electrical permits and inspections. You can also visit the Electrical Basics for Home & Business Owners web page for more information.

Permits for manufactured or mobile homes

L&I has statewide responsibility for permitting and inspecting new installations and alterations that require a permit for manufactured/mobile homes and other mobile structures. L&I also handles complaints on manufactured home defects, warranties and other homeowner issues.

Understand possible liabilities

Construction liens

Your contractor may hire other companies or subcontractors to work on your property, or provide materials for your project. If your contractor does not pay them, these companies have the right to force you, the consumer, to pay them. They can do this by making a claim against your property. This is known as a “construction lien.” A lien may be filed within 90 days of work stoppage or delivery of materials.

This type of lien is legal under state law, and it is an easy way to find yourself in financial trouble. Fortunately, there are ways to protect yourself. While you are moving through your project, you should check in frequently with your contractor so this does not become an issue. More details on construction liens can be found on our What you should know about liens page.

Verifying workers' comp coverage

When a contractor is working on your property, their employees are required to be covered by workers’ compensation insurance. However, if an employer does not have an active workers’ comp account, you could be held liable if a worker is injured on your property.

To protect yourself, verify that your contractor has an active workers’ comp account by using our Verify a contractor, tradesperson, or business tool. You can also check any subcontractors that are working on your property with this tool. If a contractor does not have employees, they are not required to have a workers’ comp account.

Now that work has begun, it's important to have regular conversations with your contractor to make sure your project is progressing on time and within budget. This may be done by inspecting work progress and paying as work is completed.

Inspect Work Progress

Check-in with your contractor frequently to inspect the work they have completed. Ensure your work is being done according to the contractor’s schedule. You may wish to check on the required permits to ensure your contractor has all permits in place and that inspections are in order. It is good to have copies of the permits, and request confirmation of all required inspections.

If you require any changes to the work that is within your contract, whether it's a change in material or scope, be sure to get any changes in writing. Avoid verbal contracts or amendments.

Pay as work is completed

Besides your down payment, you should only make payments to your contractor as significant work or phases of your project are completed. You should also withhold a portion of your payment until all work is complete and you are satisfied with the work. For example, make payments when the foundation is poured, framing is completed, roof is on, etc. rather than paying on a calendar or schedule.

When making payments, make sure you get a receipt or other documentation showing acceptance of your payment.

You should also talk to your contractor to make sure payments are being made to all suppliers and subcontractors when their portions of the project are complete. You have final responsibility to make sure that all subcontractors and companies working under your contractor have been paid, even if you have paid your primary contractor in full.

Cost overruns

Try to anticipate any problems and inconveniences that may arise. For example, with cost overruns or cleanup, come to an agreement with your contractor on how they will be handled before work begins. Make sure you document, in writing, how these issues will be handled. Again, avoid verbal contracts.

Make sure you have all the necessary paperwork provided from your contractor, prior to closing your contract, to ensure you have protected yourself against possible liabilities. Get lien releases, and educate yourself on additional resources available to you in case you encounter problems with your contractor.

Request Lien Releases

Before you make the final payment on your project, request a completed lien release from all major subcontractors and suppliers. Print or view a sample lien release. For additional information regarding liens, check out our What you should know about liens.

Know what to do if you have problems

If your contractors work has been improperly done, not done at all, or you have had a lien placed on your property, find out what you can do about these and other problems on our Problem With a Contractor web page.