The following is a post created by Phyllis Rockower in 2014 but is still relevant. Her son, attorney, and real estate investor, William Bronchick, is continuing her blog as per her wishes and continue to educate real estate investors.
HOW TO DEAL WITH CONTRACTORS
First of all, this is not about trust. You have to assume they are looking out for themselves and
behave accordingly.
1. Check the contractor out with the better business bureau.
2. Check with the state to make sure they don’t have any claims against them.
3. Ask to see their license and proof of insurance, and worker’s comp proof.
4. Get references and make sure it’s not their brother in law. You can ask for
addresses of places they did and then check to see who the owner is.
5. You should always get more than one bid. Make sure the bid is broken down into
material and labor. Be sure the list is written on a first-grade level. Don‘t assume
anything. Spell it all out. Specify materials- brand, size, brand name and product.
6. You can act as your own GC and let the main contractor do most the “handyman” type
jobs and then sub out the big stuff like roof or plumbing. Remember that the GC is going
to do that and make money on every sub.
7. Make sure you get proof of partial releases with names of subs. You have to be aware
that when the GC gets subs, you have to make sure that they get paid or you can get a lien
on your house. Stamp each check with lien waiver release stamp so he can’t come back at
you. When everything is done, you need an unconditional final waiver. That is not done
until the final inspection from the city is done.
8. The contract is the most important. In Ca. a contractor can only ask for 10% upfront so
don’t fall for that 50% crap. You should lay out a payment schedule and what they have
to do to get paid. I think it should be tied to inspector signoffs. You should set a start and
finish date with penalties for missing dates and well as rewards for an early finish. You
should include procedures for changes.
9. EVERYTHING HAS TO BE IN WRITING. Nothing oral.
10. If it’s a big job I would suggest an attorney review it.
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