The contractor hiring guide helps you decide whether to hire a general contractor or specialty trade, then walks you through the essential hiring checklist, red flags to avoid, and what your contract must include. Answer 4 questions to get a personalized recommendation.
Which Contractor Do You Need?
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Contractor Hiring Checklist
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Red Flags — Walk Away
Contract Must-Haves
How to Hire a Contractor the Right Way
Hiring the wrong contractor is one of the most costly home mistakes you can make. Unfinished work, permit violations, and liens on your property are all consequences of poor contractor selection — yet most homeowners do almost no due diligence before handing over money.
Step 1: Define the project scope before calling anyone
Before getting bids, document exactly what you want done. The more specific you are, the more accurate your bids will be and the fewer change orders you will receive. Take photos, sketch a rough plan, and note specific materials where possible ("42-inch farmhouse sink" not "kitchen sink"). Vague scopes produce vague bids, which leads to cost disputes mid-project.
Step 2: Get 3 written bids minimum
Never accept the first bid. Three bids let you see the market rate and identify outliers. A bid 30%+ below the others is not a deal — it usually means the contractor is cutting corners, underestimating the work, or planning to upcharge via change orders. The middle bid is usually the safest. Compare bids by scope, not just price — ensure each contractor is quoting the same work.
Step 3: Verify license and insurance before signing
Look up the contractor's license number on your state's contractor licensing board website — most states have a free online lookup. Confirm their general liability insurance (minimum $1 million per occurrence) and workers' compensation. If a worker is injured on your property without workers' comp, you may be liable. Ask for a certificate of insurance naming you as additional insured.
Step 4: Structure payments to protect yourself
Tie payments to milestones, not dates. A typical structure: 30% at contract signing, 30% at rough-in completion (framing, plumbing, electrical rough), 30% at 90% completion, 10% at final walkthrough and punch list sign-off. The 10% retainage is your leverage to get the contractor back to fix issues after the main work is "done."
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When do I need a general contractor vs hiring trades directly?
Hire a general contractor (GC) when your project involves multiple trades (plumber + electrician + carpenter), exceeds $5,000-10,000, requires building permits, or involves structural changes. Hire specialty trades directly when the job is single-trade (a plumber to replace a water heater, an electrician to add an outlet), when you can manage the coordination yourself, or for smaller jobs where a GC markup (15-25%) isn't justified.
How much does a general contractor charge?
General contractors typically charge 10-25% on top of subcontractor and material costs as their fee (sometimes called the GC markup or overhead-and-profit). On large projects ($50K+), the GC fee is often 10-15%. On smaller projects ($5K-20K), it's typically 15-25%. Some GCs charge a flat fee or hourly rate for project management instead.
What should I check before hiring a contractor?
Verify: (1) State contractor license — check your state's license lookup database. (2) General liability insurance (minimum $1M per occurrence) — ask for a certificate of insurance naming you as additional insured. (3) Workers' compensation insurance — if they use employees or subcontractors. (4) Get at least 3 references and call them. (5) Check BBB and Google reviews. (6) Get 3+ written bids for jobs over $2,000.
How much should I pay upfront?
Never pay more than 30-50% upfront, and only pay that after a written contract is signed. For jobs under $1,000, upfront payment of 25-50% is reasonable. For larger projects, structure payments as: 30% upfront, 30% at midpoint, 30% near completion, 10% retained until final inspection and punch list completed. Some states (like California) legally limit deposits to 10% or $1,000, whichever is less.
What should a contractor contract include?
A proper contract must include: detailed scope of work (materials by brand/model, not 'paint walls'), timeline with start and estimated completion dates, payment schedule tied to milestones, who obtains permits, change order process (all changes in writing), cleanup responsibilities, warranty terms (typically 1 year workmanship), dispute resolution clause, and contractor's license number and insurance information.