5 tips for hiring contractors

This post comes from Jeffrey Trull at partner site Money Talks News.

As thousands of superstorm Sandy victims are now beginning to discover, hiring the right contractor is critical. Choose wrong and you could be in for months of agony dealing with incomplete or shoddy work, or worse, being scammed.

Gripes with home improvement contractors rank among the highest by industry. The Better Business Bureau received (.pdf file) 5,558 complaints  related to general contractors in 2011 and an additional 8,190 for roofing contractors, putting both in the top 30 for complaints of 4,790 industries tracked.

Before you build or repair, build your knowledge of tricks of the construction trade.

2. Be thorough with references.

When it comes to a contractor's previous work, look beyond the beautiful work they'll show in photos. They could be fake. Ask for the names of customers and talk to them about the quality of work as well as the contractor's ability to stay on budget and on schedule. If possible, visit their homes and see for yourself.

3. Beware of low bidders.

Don't assume you're getting a deal with a significantly lower bid. Contractors know they're in competition, and some will bid the job low to secure the work, then jack up prices later by claiming the job is more costly than originally anticipated. Some will substitute lower-quality materials.

Don't be afraid to show the low bid to the contractors with higher estimates and ask why their competitor's bid is so much lower. Doing this will help you understand the details of your project. It could also give you leverage to get a better deal from a better contractor.

4. Get everything in writing.

Protect yourself by getting all project details included in a formal contract. This includes:

• Itemized estimates. Having separate prices for each component of the project makes adjustments for changes easier later. Ask them to list prices for labor, materials, permits and any other costs related to the job.
• Permit responsibilities. Specify who's responsible for pulling permits to meet local regulations and avoid delays.
• Subcontractors. You hired this specific contractor for a reason, so you'll want to know whom he hires as subcontractors to complete the job. Make sure to get the details on what work will be subcontracted out and to whom, and don't be afraid to check up on subcontractors just as you have for your general contractor.
• Change orders. It's easy to point to the work in progress and ask for a change that's beyond the original scope. Instead of relying on a verbal agreement, put the changes in writing so both sides are clear on the requested changes and the corresponding costs.
• Late penalties. Some contractors are truly busy, but they shouldn't keep you waiting forever with a home that's in mid-renovation. Negotiate to have the contractor complete the work by a specified date or risk losing part of their fee.

Negotiate the lowest down payment possible. It's not a good sign if a contractor can't start a job because he or she doesn't have the money or credit for materials. If your contractor insists on you paying for materials before starting work, pay the source directly and have the materials delivered to your house.

If the contractor asks you for all the money upfront, be afraid. That's a sign of a scam.

Certain states restrict the down payment amounts. California law limits down payments to 10% or $1,000, whichever is less, and this may be a good guideline no matter where you live. 

Once the work has begun, a general rule of thumb is to avoid paying out more than the level of completion on the project. If you pay out 90% for work that's only 25% complete, you risk that the contractor will stop showing up as often or at all. 

When the work is complete, consider waiting a few weeks to make the final payment to ensure you're satisfied.

More on Money Talks News and MSN Money:

• 23 tips to lower the cost of home improvement
• Beware of Sandy scammers
• See the most expensive homes in the country
• Smart Spending on the go: Get our app for Android or iPhone
• After the storm: Rebuild or move?
• Housing help for Sandy victims