New American Funding Blog

Licensed Contractors: When do you need one and how do you pick the right one?

By Britany   |  January 8, 2013

Licensed Contractor Title Picture

What kind of contractor do you need?

There are more than 40 different types of contractor licenses, including general and specialty contractors. Specialty or subcontractors are usually hired to perform a single job while general building contractors oversee the project and coordinate with the subcontractors. If a general building contractor is hired for specialty work, they must hold a specialty license for that work or must outsource it to a specialty contractor. If you only want roofing or plumbing work, it would be smart to go with a licensed specialty contractor. But if you are looking to remodel your kitchen, which would require plumbing, electrical, and carpentry work under one contract, a licensed general building contractor should be hired.

How do you find the right licensed contractor?

You wouldn’t buy a new car without researching it first right? So of course you wouldn’t hire a contractor to come in and work on your biggest investment (your home) without doing your due diligence.  Shop around before you hire the first contractor that appears on the scene. One of the best ways to select a licensed contractor is to seek out personal recommendations from friends or relatives who recently had work of the type you want completed. If you’re at a loss for referrals, then try to get at least three written bids on your project. Don’t make your decision based on price alone. In fact, if there is one bid that is significantly lower than the other two, there is a chance that they forgot to add in costs or their work is sub-par.  It doesn’t hurt to ask to see some of their past work and call their references to make sure they don’t have any unsatisfied clients.

Interviewing licensed contractors to work on your house?

Follow this checklist:

  • Ask for their pocket license and a picture I.D. to make sure they are the person they say they are
  • Check their license number and make sure it is valid on this website. Contractors are required to have their license number on their business card and on all bids and contracts
  • Ask to see a copy of the certificate of insurance, or ask for the name of the contractor's insurance carrier and agency to verify that the contractor has insurance
  • Verify the contractor's workers' compensation and commercial general liability insurance coverage
  • Ask to see some of their past work
  • Call their references and ask questions:
    • Did the contractor keep to the schedule and the contract terms?
    • Were you pleased with the work and the way it was done?
    • Did the contractor listen to you when you had a problem, and seem concerned about resolving it?
    • Did the contractor willingly make any necessary corrections?

When do you need a licensed contractor?

Not sure if the project you are doing requires a licensed contractor? Not all construction activity requires a state license but a great number of activities that require building permits do require a state contractor’s license. This varies by state so make sure you check what projects require a contractor’s license in your state. Follow this link to find out what projects in the state of California require a licensed contractor.

Unlicensed contractors are limited in the work they may perform, or in the size of the projects they may undertake. An unlicensed contractor might try to tackle a job that is just bigger than their skill level, potentially putting you in the situation where you are paying more just to fix the mistakes  than you would have should you have chosen to work with a licensed contractor. Although an unlicensed operator may give you a low bid, the risks of possible financial and legal consequences outweigh any benefits a lower bid may seem to offer.

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