10 Things

1. "My license is worthless."
When you hire a general contractor to come 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 licensing requirements, according to R.L. Bryson's "Contracting in All 50 States" — and where requirements do exist, they vary widely. In California, one of the stricter states, budding contractors must only prove their financial solvency and pass a written exam (sample test question: "Where would the drain and sewer for a residential building be located?").

Maybe that disparity helps explain why the category of home-improvement services — which tend to be completed or overseen by contractors — ranks first on the list of consumer complaints issued by the National Association of Consumer Agency Administrators.

So how should you shop for a contractor? Ask for references, of course, but don't just interview your candidate: Actually visit a job in progress to watch how he works. (If your would-be contractor doesn't have a job at the time, that alone is a bad sign.) Tom Pendleton, owner of McLean, Va.-based consulting firm The House Inspector, offers this advice: "I have a three-year rule," he says. "Close to 95% of home-improvement contractors go out of business or change their name [due to consumer complaints or mismanagement] within three years, so you want a contractor who's been in business under the same name for more than three years." A good outside source: Handyman Online (www.handymanonline.com), 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.

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 used and, of course, 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 payment schedule that lets your money get ahead of the work. "When [a contractor] has received 50% of the money for 25% of the work, that's when he stops showing up as often," says Levine. He suggests a plan such as paying 10% down, 25% when plumbing and electrical work are done, 25% after cabinets and windows, and 25% for flooring and painting. "And don't hand him the last 15% on his final day. 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, a mortgage salesman with Bank of America, recently decided to enhance his Wall, N.J., home by putting a new cobblestone-like concrete path around his swimming pool. It was an $11,000 job, and he paid $7,000 up front 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," says Zarrilli. "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." A Monmouth County grand jury has issued an indictment against the contractor, but there's now a motion pending to dismiss it. (The contractor's lawyer, Sean Gertner, claims his client is not guilty of theft by deception, as charged: "He was thrown off the job.")

Mark Herr, 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," says Herr. You might get sucked into such a scenario if your contractor tells you — like Zarrilli's did — that the up-front cash is for materials. "Typically," says Herr, "that happens because the guy needs to pay up front for goods since he has no credit, probably because he screwed up somewhere else." Your preemptive 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. What happens when one comes in way lower than the others? It's natural to think you've lucked out.

Not necessarily, says Lisa Curtis, director of consumer services for the Denver district attorney's office. Because of the fixed costs of material and labor, a contractor who offers you a stunningly low price is suspect. Common tricks include starting the 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 subquality; 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 hold your house hostage."
The number of home-improvement projects in the U.S. has risen 25% in the past five years, according to Kermit Baker, director of the Remodeling Futures Program at Harvard University's Joint Center for Housing Studies. That means contractors are busier than ever — and because they're juggling so much work, you can pretty much expect that the schedule for completing your job will go out the window.

"If the contractor's got too many jobs going," says Pendleton, "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. That person costs the contractor about $1,000 per week. If the job drags, the contractor has to pay that person for as long as he is there. Then it becomes in the contractor's interest to finish the job."

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