10 things contractors won’t tell you (© Goodshoot/Corbis)

1. “My license is laughable.”
When you hire a general contractor to build an addition onto your house, you probably assume you’re getting someone who has spent years learning his craft, giving him the proper credentials to saw a hole in the side of your den. In reality, you could be getting a madman with a toolbox who answers to no one. That’s because only 27 states have any state-licensing requirements — and where regulations do exist, they vary. In California, one of the stricter states, aspiring contractors must have four years’ experience, prove their financial solvency and pass a written exam to become licensed, whereas in South Carolina, they need only two years of experience along with an exam and submission of financials. Maybe the disparity helps in part to explain why the Better Business Bureau received 1.1 million inquiries in 2006 from people seeking “reliability reports” on specific contractors — to ensure they were trustworthy enough to hire — ranking them third among industries for that request, according to the Council of BBBs.

Read:  4 tips for hiring contractors (and 10 ways to avoid scammers)

So how should you shop for a contractor? Ask for and check references, of course. One good resource is Handyman Online, a referral service that can connect you with contractors in your area who are legitimately licensed, carry liability insurance and have at least three references. And Tom Pendleton, owner of McLean, Va.-based consulting firm The House Inspector, offers this advice: “Close to 95 percent of home-improvement contractors go out of business or change their name within three years” due to consumer complaints or mismanagement, he says, “so you want a contractor who’s been in business under the same name for more than three years.”

2. “Our contract favors me …”
When it’s time to sign on the dotted line, most contractors will present you with a boilerplate agreement based on one created by the American Institute of Architects. It lays out the job’s details, including its scope, materials to be used and a payment schedule. Not surprisingly, according to Mark Levine, co-author of “The Big Fix-Up,” a consumer guide to home remodeling, some contractors will set up a schedule that puts your payments ahead of the work. “When (a contractor) has received 50 percent of the money for 25 percent of the work, that’s when he stops showing up as often,” he says.

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Levine suggests a plan such as paying 10 percent down, 25 percent when plumbing and electrical work are done, 25 percent after cabinets and windows are finished, and 25 percent for flooring and painting. “And don’t hand him the last 15 percent on his final day,” Levine says. “It’s called ‘retainage,’ and you should keep it for 30 extra days just to make sure everything is working the way it should.” In addition, if the job is big enough — say, $50,000 or more — Levine suggests investing in four hours of attorney fees to devise a contract that includes a fair payment plan, with retainage, and stipulates that disputes will be settled through arbitration (the quick and easy way to do it).

3. “ … so I can take your money and run.”
Mark Zarrilli decided to enhance his Wall, N.J., home by putting a new path around his swimming pool. It was an $11,000 job, and he paid $7,000 upfront to the contractors — supposedly for materials. “They brought somebody in to do the preliminary brickwork, then played a duck-and-run game for three months,” Zarrilli says. “They’d tell me the truck broke down, the wife was sick, the cement company couldn’t deliver. I’ll never get my money back.” Zarrilli took the dispute to the Monmouth County Prosecutor’s office, who charged the contractor with theft by deception. (The contractor eventually pleaded guilty.)

Mark Herr, former director of the New Jersey Division of Consumer Affairs, calls this alleged scam “spiking the job,” and it’s one of the worst possible outcomes when you’ve signed a contract that includes a front-loaded payment schedule. “By completing a little bit of the work, they can face only civil rather than criminal charges,” Herr says. You might get sucked into such a scenario if your contractor tells you — like Zarrilli’s did —  that the upfront cash is for materials. “Typically,” Herr says, “that happens because the guy needs to pay upfront for goods since he has no credit, probably because he screwed up somewhere else.” Your pre-emptive strategy: Offer to have the materials delivered to your house and to pay for them C.O.D.

4. “Bargains don’t exist in my world.”
Before hiring a contractor, you’ll probably solicit various bids. If one comes in much lower than the others, it’s natural to think you’ve lucked out, but that’s not necessarily the case, says Lisa Curtis, former director of consumer services for the Denver district attorney’s office. Because of the fixed costs of materials and labor, a stunningly low bid is a red flag.

Common tactics include starting a job based on a bargain-basement price, then telling the customer that the work is more complicated (and more costly) than originally thought. Then there’s the contractor who quotes a price that includes windows he knows are of poor quality; once the job is under way, he’ll present his client with what is clearly a better window and talk him into upgrading. “Ultimately,” Curtis says, “you may pay more than you would have with a reputable person who started off at a reasonably higher price.”

5. “I’ll be back when I feel like it.”
So you found yourself a good contractor. Terrific — but here’s the bad news. When contractors are busy with multiple jobs, as the best in the business inevitably are, you can pretty much expect the schedule for completing your job will go out the window. “If the contractor’s got too many jobs going,” Pendleton says, “the workers might only be in your house for two hours when they should have been there all day.”

One way to guarantee that your job won’t stretch to Wagnerian lengths, he says, is to hire a contractor with a lead person or project manager, “a working supervisor who is on the job from beginning to end.” If the job drags, the contractor still has to pay that person, so it “becomes in the contractor’s interest to finish the job,” Pendleton says.