Do your homework when shopping for a contractor
By Jim Middlemiss • Bankrate.com

So your home is looking a little weathered and needs paint. Or maybe you've outgrown those three bedrooms and need to renovate or build a custom home.

The options are simple: You can tackle the project yourself and show the world how skilled you are or, if you're toolbox-challenged, you can do what most sane people do -- hire a contractor.

But be warned: Hiring a contractor is not for the faint of heart. You should not simply flip a coin or dial up the first name in the phone book. Rather, you need to take your time to research who you want to tackle the project. You have to live with the results, so make sure you get it right.

Before you start contacting contractors, understand what you want them to do. Plan your project and put it on paper. The more details you include, the better. This will be important when you meet with contractors since you will have to explain to them what you want in a consistent manner.

Where to find a contractor
While the phone book is a good place to start looking for contractors, don't stop there. Many contractors belong to trade associations and agree to follow an ethics code and join a provincial home warranty program, says Grant Ainsley, executive director of the Alberta Home Builders' Association.

Most provinces have a home builders' association, and there is also a national body, the Canadian Home Builders' Association. The CHBA Web site features a search function that lets you find members in your area, but not every province is covered. It also features information about buying a new home and renovating.

In addition, Construction Canada.com, an on-line directory, contains information about contractors and building associations across the country.

Next, canvass family, friends, and work colleagues for names of contractors they recommend or suggest you avoid. Also pay attention to work going on in your neighbourhood, where you can see contractors in action. Most newspapers also have a real estate section where contractors advertise their services.

Narrow the list
Once you have a list, winnow it down to three names and contact them for quotes. Make sure they provide you with a written bid based on the same requirements, says Ainsley. Then you can properly compare the bids. The bid should include materials, labour and time needed to remodel your kitchen, unfinished basement or addition.

Check them out
Ask the contractors for client references and take the time to contact them and ask to see the contractor's handiwork up close. Contact the local home builders' association and verify they are members. Also contact the local Better Business Bureau to see if anyone has complained about the contractor. You can also talk to some of the contractor's suppliers to see if the company is financially stable. The last thing you want is for the builder to go bankrupt in the middle of your project.

Unfortunately, Ainsley says, most home owners simply "hear from somebody that such and such is a good builder, and they won't do a lot more to check them out."

He says it's important you probe the contractor on things like how long they have been in business under that name. One sign of financial instability is the use of multiple names over a period of time.

"Ask the right questions," Ainsley stresses. Request documentation like the contractor's goods and services tax number to make sure they're above board. Get copies of insurance policies and confirm with the insurer the policy is valid.

Get the contractor's workers' compensation account number and contact the provincial workers' compensation board to confirm the coverage is valid. If it isn't, Ainsley warns you could be liable for injuries workers suffer while in your home.

Assessing the bids
When it comes to assessing bids, money isn't the only concern. If one bid is out of whack with the others, it could be an indication the contractor has missed something or is using inferior materials.

Make sure the bids cover the same work and materials. If not, note the differences for follow-up questions. Probe the contractors about their bids and the points on which they differ. Look for skill and craftsmanship and ask yourself if you'd be comfortable working with this person.

Find out from the contractor who will do the work -- his employees or subcontractors? If the answer is subcontractors, do the same type of check and make sure they are licensed, bonded and properly insured.

Get it in writing
Once you decide on the contractor, the most important thing you need to do is incorporate the quote into a written contract, according to Ainsley. It should list such items as:

• the full name and address of the company. You'll need this in case things go wrong and you have to sue or report the company to the BBB or a builders' association.
• an explanation of what work will be done. It's important you agree on the details of the project. Make sure you set out who will be responsible for garbage removal and the length of any warranty.
• an established work schedule. Include start and end dates. As well, set the ground rules as to when workers will arrive and leave and what days of the week they'll work and whether they will work on holidays.
• specific materials to be used and brand names. Ainsley says if a contractor installs the wrong countertop and then promises to "give you upgraded tiles for free, get it in writing." Otherwise, you could be left out in the cold.
• a payment schedule. Don't pay the contractor the full amount in advance. If the contractor wants a down payment, Ainsley says "put the least (amount of money) down as possible." Your best bet is to pay the contractor as the project progresses and milestones are met.
• a holdback and a date for release of payment. This protects you in the event that minor repairs are needed at the end of the project.
• a firm price. Make sure it covers everything, including the subcontractor's fees and taxes.

If the contractor presents you with a standard-form contract, scratch out the things you don't like and initial them. Don't leave any lines or spaces blank. Fill in "not applicable" if a provision doesn't apply.

Ainsley says while the lowest-priced bid is attractive at first blush, consumers must remember, "You get what you pay for."

Jim Middlemiss is a freelance writer and lawyer based in Toronto, Ontario. He's a frequent contributor to National Post, Investment Executive and Wall Street and Technology.