Hiring a General Contractor - 3 Red Flags
Here is some advice to help you hire a general contractor. There is nothing worse than finding out halfway through your construction project that the general contractor you hired is not as experienced as you thought, or worse, a scam artist! Let’s take a look at some of the top red flags that will be waving at you before you sign the dotted line. We will look beyond the obvious concerns like lack of a website or referrals. Read on for some insight in avoiding a major disaster on your custom home project.
Due Diligence
During your interview process, you land on a General Contractor who you think is a great fit to build your custom home. Their personality and experience are all impressive. So should you sign with them? Not until you complete your due diligence. It doesn’t matter how much you like the person do not skip this step! For more on due diligence, you can check out our post 3 questions to ask a General Contractor during your selection process.
1. Citations
Always look up the license number for your prospective General Contractor. You can google it but more importantly, you should check for records with the local governing board. In California that is the California State Licensing Board (CSLB). If you find that the General Contractor has a citation, or maybe more than one, you should carefully review it. Take a look at the nature of the complaint and use your judgment. Citations are a red flag but it doesn’t always mean the General Contractor was at fault. You should ask the General Contractor about the citation and what happened. You can even call the CSLB for more info.
2. Large Deposits or Pre-Payments
Did your General Contractor ask you for a large deposit before starting work? Watch out this is a major red flag! First of all, it is against the law in California for a General Contractor to ask for more than $1,000 as a deposit before starting work on your custom home. Did your General Contractor tell you they need $50,000 to start? $100,000? That is a very bad sign. Often this happens when a General Contractor gets behind in payments on another project. They will be using the money from your deposit to pay for labor and materials on another one. In this case it is likely the General Contractor will also get behind on payments for your project which leads to big delays. When the General Contractor doesn’t pay the laborers on time they have a tendency to walk off. Who can blame them? No-one said General Contracting is easy and if one asks you for a large lump sum up front you will know that the job is clearly too much for them to handle.
3. No Material Allowances
When you finally receive a contract from your General Contractor make sure you look for how they are accounting for materials on the job. If they do not have materials listed in the contract that is something to watch out for. Let’s break it down into two concerns:
Firstly, the materials may collectively cost more than you think which will cause you to go over budget. Let’s say one General Contractor quoted you $1,000,000 for your project and the other $1,200,000. Before choosing one, be sure to check on how much the materials will cost and whether that is included in the total. In this example, the $1,000,000 bid may not include all your finish materials like kitchen cabinets, flooring, doors or light fixtures. Since there are so many materials to purchase on any given job, a good question to ask your prospective General Contractor is “what, if any, materials are not included in your contract?” You should get the response in writing so you know exactly what to expect later in the project.
Secondly, if materials are not listed as material allowances, you have less predictability in the future cost. With material allowances, the General Contractor is using measurements and industry knowledge to ballpark the costs of your materials. With this method, you will know a general range of what the materials will cost. Without allowances, you lose the expertise of the general contractor for budgeting and you may end up underbudgeting for what you will need.
Speaking of allowances, you may be thinking “but I want to buy my own materials so I can save money…what’s wrong with that?” There is a lot going into the ordering and handling of materials for any given project. While you may or may not save some money on the hard cost of each material, you are less equipped to handle the whole process which can result in costly delays.