Your house—it’s probably the biggest asset you have. But do you do your homework when it comes to home construction? Don’t let your dream house become a money pit. Below are some things you should consider doing before you sign that contract with your contractor.
Below are some tips compiled from NBC contributor Jean Chatzky, MSNBC.com's Consumer Man Herb Weisbaum, and Dateline's Victoria Corderi:
You can look in the Yellow Pages and you’ll find 20 or 30 companies under a single category. Rather than randomly calling around and selecting, consider asking neighbors and friends who live in the community for names. Real estate agents are also good sources of referrals.
Shop for a contractor
Get bids from several contractors. Remember, while price is important, choosing the company with the lowest price "is not always the best idea," says Sara Ann Busby, vice president of the National Kitchen and Bath Association to MSNBC.com's Consumer Man Herb Weisbaum.
Ask the contractor for proof of a license and insurance coverage — liability, property damage and workers compensation. You can also ask for a list of suppliers to see if the company pays its bills on time. Check the contractor’s business history for red flags such as bankruptcy.
It is not enough to just call the list of names the contractor provides – you have to dig a little bit. Talk to former customers. Did they get what they want? Are they glad they hired this contractor? Did the crews show up on time? Clean up at the end of the day? Did the project come in on time and on budget? Did the work hold up well over time?
You should also make sure the company has no complaints registered against them with the Better Business Bureau or your state’s Attorney General or Consumer Protection office.
Make the call
Check that the contractor or his company answers the phone rather than a recording and that the repair pro is responsive.
Understand the cost
Before you have the technician come out for the first time, make sure you know how you’re going to be charged. Is it by the hour? Is it by the job? Is there a separate cost for giving you an estimate? And if you decide to go with that company, will that estimate be included in the overall price for the project?
10 percent down
Never give more than 10 percent as a down payment and only make payments in scheduled increments. Some experts even recommend paying subcontractors directly to make sure they get paid.
The contract should spell out the schedule for the rest of the payments, either based on specific dates or project points, such as when the electrician starts or the cabinets are installed.
Get a guarantee
Most large companies will guarantee their work (parts and labor) for 60 to 90 days. That’s something you might want to insist upon.
Recognize signs a of trouble
"Cash only" is a problem. So is a person without a business card. The contractor’s business card should have more than a cell phone number. It should have a physical address of an office, even if that office is a home office. And never deal with anyone who tells you that the great price they’re offering is only available today, demands that the entire job be paid for in advance, or can’t answer questions to your satisfaction.
How do you feel about this contractor? Remember, you’ll be dealing with this person for months on something very personal — your home.
"Everyone talks about the money. Not that the money is not important," says Ed Shimmon. "It’s the time, energy and the stress that it puts on the family."