Feb. 6, 2018.
Your plumbing’s on the fritz, your deck’s seen better days, or maybe you’re ready to make a bathroom upgrade. As a homeowner, and also as a homebuyer who uses a renovation loan to buy a fixer-upper, there will come a time when you’re in need of a good contractor to keep your house in good shape.
Where can you find a qualified contractor?
Wasting money on home improvements poorly done can be budget- and heartbreaking (not to mention back-breaking when you have to finish the project yourself). That’s why we asked an expert to clue us in on the critical screening criteria every homeowner and buyer needs to look for before considering an outside contractor for a job.
Ashleigh Cloud Trent, CAPI, CPRIA, member of the Private Risk Management Association (PRMA) and insurance advisor with Swingle Collins and Associates in Dallas, Texas, shares some common certifications and licenses that a qualified contractor should have:
- Depending on the state, a contractor might have a registration or certificate of completion for some state-mandated CE (Continued Education).
- Some contractors — for example, air conditioner and refrigerator contractors in some states — must have license or contractor numbers on the side of their vehicle.
- “Ask state licensing agencies what is required of the specific contractor or find state websites to validate licensing,” Trent says.
What questions should you ask a contractor you’re vetting?
Depending on the type of repair project, the questions may vary. For most home renovations and improvements, Trent recommends asking:
- Does this contractor have a physical address or a website?
- Has the contractor engaged in this type of work before? If so, for how many years?
- Do you know anyone who has used this contractor before? If so, what was their experience, and would they use them again or recommend them?
- Can they provide any references or testimonials from prior clients? “Also check social media to find out a quick history,” Trent says.
- What’s their rating on the Better Business Bureau?
- Are they members of professional organizations?
- Do they have insurance, with copies of a certificate or bond, depending on state?
- Depending on the trade, does your state require a license?
- Is the name of the contracting company the same as the last name of the person who owns it? Trent explains, “If companies get a bad review from the BBB, they may close the entity and open another in a different name.”
- What’s the condition of the vehicle they drive? Is it clean or dented/has a dirty dashboard? “Typically,” Trent says, “This is a reflection of the work they do. Also, how are they dressed?”
- What type of permits will be pulled? Who’s responsible? Who will process and close the permit?
- Do they show up on time? How long does it take for them to respond to calls, texts, or emails?
Asking to see a certificate of insurance, per question number seven, could help to ensure you won’t be liable if a contractor gets injured on your property.
This certificate shows if a contractor is bonded and if they carry workers’ compensation. “Always ask to be listed as a certificate holder, which will add you to their liability coverage as an additional insured,” Trent says. “It will also mean that their policy will have to defend you as well if a liability suit is filed.”
Still, it’s possible you could be sued if a contractor gets injured on your property. For full protection, Trent advises all homeowners to carry personal liability coverage. “This includes your location and offers an umbrella or excess liability policy to protect you from verdicts or settlements in excess of your underlying liability limits,” she says.
The questions above can weed out some of the bigger red flags from the first meeting or phone call. Trent also recommends checking a contractor’s:
- Voicemail – “Is it specific or generic? It should be professional,” she says.
- Email address – Like a voicemail, is a contractor’s email personal (Gmail or Yahoo)? Or is it professional and company-specific?
- Website – Does it have pictures of employees and owners or just word descriptions of services?
- Business cards – Trent says, “A perforated edge indicates they are printed at home and that a business may not be well-established.”
- Estimates – Are they handwritten or professionally presented?
Using these criteria can make getting a skilled contractor easy — once you know what to look for. However, the number one warning sign that identifies a potential scammer, Trent says, is door-to-door solicitation for repair business. “Good and reputable contractors are highly sought after and not out knocking on doors. Other not-so-obvious red flags include asking for payment in cash, providing an estimate that’s ‘too good to be true,’ and high-pressure sales techniques,” she explains.
“More than pleased with Will Koenig and his team at Cornerstone. From day one to closing, they were helpful, patient, and professional. They were always there to help us through any and all questions we had, even if they weren’t directly related to our mortgage.” – Your friendly loan officer awaits!
When do you pay for home repairs?
You hired a trustworthy contractor, and now your pet project (or emergency repair) is underway. Here’s the next common roadblock you can expect to face. When do you pay your repairman?
“It can be common for the contractor to require a small portion of the repairs as a down payment,” Trent says. “This helps them purchase the materials necessary to complete your project. However, you should never pay for the entire job upfront and only make the last payment once the project is complete, and you are satisfied with the repairs.”
Upon completion, Trent recommends asking for a release of the lien. If a contractor doesn’t pay a subcontractor, a subcontractor or supplier can file a lien against your property. A release of a lien attests to the fact that everyone has been paid in full, and forms may be available by state. “It takes care of potential headaches down the road,” Trent says.
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How do you pay for home repairs?
Here’s yet another common question homeowners face. How do you pay for your repair project if you don’t have enough cash in savings? Checking in with your lender before a project begins can give you a better idea of the funding options available to you. “There are some great renovation loan options in today’s market,” Sharla J. Ellis, Senior Vice President at Cornerstone Home Lending, Inc., says.
Options for borrowers may include:
- An FHA loan, known as a 203(k) renovation loan.
- A conventional loan, known as a HomeStyle renovation loan.
Both can be used for either a purchase transaction (to renovate a home being purchased) or a refinance transaction (to renovate a home that is already owned), Ellis explains. “The conventional side also offers a more simplified and streamlined ‘purchase escrow’ program. This can be used for smaller scale renovations for a home being purchased with fewer requirements,” she says.
The main advantage of these loan programs is that the cost of improvements can be financed into the loan. Each of these programs lends on the “as-completed value” of the home, which assumes the improvements have been made. “This allows you to borrow against the higher, proposed or finished value of your home,” Ellis says.
To get your home renovation questions answered fast, take the first step and download LoanFly. Use our free app to find out how much home renovation loan you prequalify for. Then connect with a loan officer who can help.
For educational purposes only. Please contact a qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.