It happens all too often - someone with a pickup truck and a smile will knock on your door, mention something about your house that may need work, and they'll offer to do it at a cost that seems almost too good to be true. Frequently, they'll tell you they were working in the area anyway, which is part of why the job will be so cheap. But before you agree to have any work done, it pays to do a bit of research.
While licensing isn't necessarily a measure of competence, it does imply a high level of professionalism and suggests that the contractor is committed to his or her job. More significantly, licensing can protect you from a number of potential problems, such as the following:
Unlicensed usually means uninsured. If you use a contractor who is uninsured, it means the contractor has no way of reimbursing you for any property damage he or she causes. This means you end up paying the price. Likewise, if contractor carelessness leads to injury or damage to someone else's property, the problem is likely to become yours.
No coverage under homeowner's policy. Some homeowners believe it is safe to use an uninsured contractor, assuming that any damages incurred would be covered under their own insurance policies. However, this isn't the case. Most homeowner policies require that any work to the property be done by licensed contractors; coverage is often specifically excluded for damages caused by "bootleg" contractors.
Noncompliance with building codes. Most building projects, even minor ones, usually require permits and inspections. Unlicensed contractors are often unfamiliar with the applicable building codes and are unable to obtain permits. If your project isn't permitted or doesn't comply with building and zoning codes, you may - and probably will - be ordered to remove or repair the job. Even if a building inspector doesn't "catch" your code violation right away, you will almost certainly have to correct it if and when you try to sell your house.
Poor quality work. Not all unlicensed contractors do poor quality work. And not all poor quality work is done by unlicensed contractors. However, as a rule, if there's shoddy work to be done, it's usually done by unlicensed contractors. Because unlicensed contractors aren't subject to meeting specific standards, they are often untrained, less experienced, and unqualified to do certain types of work. Sloppy work by an unlicensed contractor could have serious ramifications. It's a safety hazard if the work isn't done accurately. If it's not structurally sound, if it's not wired properly, you could face major consequences at some point.
Con artists. Scams in the construction industry especially in the home improvement business have become almost legendary in the last few decades. Con artists posing as qualified contractors, and often targeting the elderly, have made national news any number of times. Even so, unwary homeowners continue to be taken in by these pseudo contractors, who often promise unrealistically low prices or use scare tactics to close the deal. In these cases, the homeowner typically ends up with either an incomplete or a low quality improvement project - and several hundred, or even thousands of dollars less in the bank account.
Limited recourse for broken contracts. If you have a dispute with a licensed contractor, you can call his or her licensing agency. The licensing agency has the authority to suspend or revoke a dishonest contractor's license. While this doesn't necessarily ensure a contractor will play fair, it gives him or her considerably more incentive to do so. These regulatory authorities, however, cannot take this sort of action against unlicensed contractors. Therefore, homeowners often find that their only recourse is a civil lawsuit. Because many unlicensed contractors go in and out of business readily, such a lawsuit is frequently a waste of time. Consumers in some states do not even have this option - in areas where licensing is required, contracts with unlicensed contractors may be legally unenforceable.
Even when a license is required, there is no guarantee that every contractor you encounter will actually have a license. While there are certainly honest and competent contractors out there, the industry is unfortunately plagued with incompetence and con artists. It is essentially up to you to protect yourself. Therefore, when evaluating potential contractors, you should be diligent in your screening process. There are a number of "red flags" you should watch for:
Unsolicited phone calls or visits. Although some reputable contractors market their services in this way, it is a tactic more often used by remodeling con artists. Be especially wary of a contractor who offers you a bargain price, claiming that he or she is doing a job in the neighborhood and has leftover materials.
High-pressure sales pitches or scare tactics. Don't be pushed into hiring a contractor by forceful sales techniques, special "today-only" deals, or the threat that some defect in your house is a safety hazard. Dishonest and disreputable contractors often prey on their victims' fears by warning them that their furnace is about to blow up, their roof is about to collapse, or some similar catastrophe is about to occur.
Large down payments. If a contractor asks for too much money up front - or insists you pay in cash - it can be a sign that he or she is going to take your money and run.
No verifiable address and phone number. Be cautious of contractors who give you a post office box with no street address, or who seem to use only an answering service. Most home improvement con artists operate without a traceable phone number.
Unwillingness to give you a price. A reputable contractor should be able to provide you with a bid before beginning work on your project. If the contractor says he or she can't do so, or skirts the issue of cost, you are at great risk of being taken advantage of.
Unwillingness to sign a written contract. Always get the terms of the construction agreement in writing. A complete contract should include: a description of the work done, materials used, labor cost, and payment schedule. It should also include the contractor's license number.
Insurance or licensing information you cannot verify. A qualified contractor should be able to provide you with proof of both licensing and insurance coverage. If the contractor can't give you a copy of his or her license and insurance policy, have him or her at least give you the license and policy numbers. Using the insurance policy number, call the contractor's carrier to make sure the policy is still in effect and that it covers projects such as yours. Also, call your state or local licensing board to verify the contractor's licensing information. The licensing agency should also be able to tell you if there have been any complaints registered against that contractor. It is also a good idea to ask for some other proof of identification at this time, so you can be sure you are actually dealing with the person whose name appears on the license.
Don't rely on a handshake
If you have Internet access, you can find contractor licensing information online at www.njconsumeraffairs.gov/ . You can also call your local building or planning department to inquire about licensing requirements.
The bottom line
When you're shopping for contractors, using licensed contractors is a smart move in many ways: It encourages and supports the legitimate, law-abiding businesses in your community. You can generally expect a better quality of work. It encourages employment in your community, as unlicensed contractors are more prone to hire illegal workers. And it protects you against unwanted liability if things don't go as planned.