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Real Estate Mentor: Finding the Right Building Contractor – Part One: Insight and Tips from a Licensed Contractor and Real Estate Mentor & Investor

Part ONE of a TWO part article

When starting a commercial or residential construction project “begin with the end in mind.”

How to hire a contractor

How to Hire a Contractor, Part 1 of 2

Before beginning a real estate building or real estate remodeling project all residential real estate investors, homeowners and commercial real estate investors need to find the right Licensed Contractor! Here’s how…

Homeowners and real estate investors have discovered by remodeling and updating kitchens, adding an additional bathroom, or installing new energy efficient windows they can significant add value and utility to a property. In most cases reasonable upgrades to a kitchen, adding a needed bathroom, cleaning up the exterior and yard of a house, and/or updating the landscaping will add value in excess of the investment in those types of improvements. Commercial investors face the same basic problem on their projects with finding the right contractor!

Caveat Emptor or “Let the Buyer Beware” is good advice for both commercial real estate investors and home owners/residential real estate investors!

Unfortunately the biggest source of consumer complaints nationwide in the construction business is on home improvement, remodeling projects, or a commercial real estate project. Most complaints and serious problems come with the lack of research and diligence in the contractor selection process, which results in homeowners and commercial real estate investors becoming the victims of a dishonest, negligent, or unlicensed contractor(s). Most of the nightmare stories that I hear from homeowners and real estate investors about a home improvement or remodelling job gone bad was a direct result of the homeowners and real estate investors failure to check, verify, and to be clear as what is to done and how much it will cost.

Fortunately, most of the construction project problems and complaints could be avoided or at least seriously reduced if homeowners and real estate investors did their homework in advance and selected a reliable, honest, and proven licensed contractor. It is a sad but true comment that most homeowners and commercial real estate investors spend less time choosing a contractor than they do planning a family vacation.

The process of hiring the right contractor for a project will take some serious and concentrated effort on the part of homeowners and real estate investors. Homeowners and real estate investors absolutely need to check and verify the potential contractor’s license status and should call and visit with the potential contractor’s references.

Homeowners and investors should have contractors give them a written detailed scope of work, time frames with deadlines, break downs of costs for materials and labor, and a written understanding of how and when process payments will be paid. All of these need to be part of a written contract.

Selecting a Licensed General Contractor or Licensed Subcontractor
General building contractors are basically project managers. They manage or supervise projects and they schedule and coordinate the use of appropriate subcontractors as needed for a particular construction or remodeling job. For example, if a homeowner or investor is doing a complete kitchen remodeling job which involves several “trades,” such as a plumber, electrician, and carpenter, the use of a licensed general contractor is appropriate and highly recommended. If the homeowner or investor is doing a single trade job such as putting on a new roof then a specialty or subcontractor could be hired to do that single project.

Check out and verify the Potential Contractor’s License Status
When do homeowners and real estate investors need to check and verify a contractor’s credentials for a job? Before a homeowner or investor even think of signing anything they should check to ensure that the contractor is licensed, bonded, insured, and has excellent local current references. Homeowners and real estate investors absolutely need to check and verify everything about the prospective contractor(s).

Homeowners and real estate investors always need to check and verify the potential contractor’s license status with their particular State’s, or Province’s, contractors licensing board or State registrar of contractors. Many of the registrars are online and the license status and history of the contractor(s) are available to check. Many states, such as the California’s Contractors State License Board, provide extensive information on the holders of the license, the license history, consumer complaints, and the bonding information.

Check out, verify and visit Potential Contractor’s References
For the most part, licensed contractors with a track record of being in the contracting business at least five or more years are usually competent, ethical, honest, dedicated, hardworking, financially stable, and responsible in their business dealings.

Always ask the potential contractor(s) for at least three past, but recent, local references and one or two references of current jobs they are working on. Make sure and call the past references to verify that they were completely satisfied with the contractor’s work and the project overall.

Asking potential contractors for the names and addresses of their current local jobs will afford you the opportunity to “stop by” first thing in the morning to check out the work being done, and if the job site is clean and organized (it may need dusting and not be ready for company to drop by, but it should not be a total disaster). By “dropping by” a current job site you might just “run into” the homeowner before they go to work. That is a great time to just ask: “How is the job going?’ and “Are you happy with the quality and timeliness of the contractor’s work?” and “Would you recommend them to your friends?” and lastly “How were any issues that came up during the course of the project handled by the contractor?”

I recommend that homeowners and investors also check out the potential contractor(s) with their local city or county building department, the local city or county consumer protection agency, the consumer fraud department of the District Attorney’s office or State Attorney General’s office, and possibly the local Better Business Bureau. This probably sounds like over kill, but better safe than sorry. Homeowners and investors should check with these organizations to see if they have any information, especially negative information, about the potential contractor(s) they are investigating. They should find out if there are any complaints about the potential contractor(s), or other relevant negative information on file about the potential contractor(s).

In addition to current and past references, homeowners and real estate investors need to get additional data from the potential contractor(s). Homeowners and real estate investors must obtain the contractor’s business address and their business telephone and fax numbers. Be sure and verify that they are not just a cellular phone with local private mail box. A potential contractor who essentially operates out of the back of his pickup truck and only has a cellular telephone may be very tough to track down if something goes wrong or there is repair/warrantee issues in the future.

One of the best ways to select a highly licensed qualified contractor is to visit a local investor club [check out websites for local investor clubs]. Go an attend the local investor club, and ask experienced investors who they regularly use and recommend for your type of project. Some times the personal recommendations from friends or relatives, who recently had similar projects completed and were satisfied with the job, may prove to be worth checking out. Don’t rely solely on a recommendation from just anyone. Get referrals from successful real estate “rehabbers.” And then Always check each contractor out completely, references, license, bond, insurance and everything you can.

There are no short cuts in the verification process to finding the right contractor.

Homeowners and commercial real estate investors should not allow themselves to be high pressured into not checking references before signing a contract by a silver tongued, smooth-talking salesperson.

PART II of this article “FINDING THE RIGHT BUILDING CONTRACTOR” can be found on www.RealEstateMentor.co
Copyright © 1985-2014 Howard Edward Haller, Ph.D., Haller Commercial Real Estate, and Real Estate Mentor Co.
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