Jody Costello simply wanted to create a safe place in her San Diego home where her aging mother could live comfortably. The addition she’d planned would cost $150,000, and she’d already given the contractor a
$30,000 deposit.
 

Three weeks after handing over the check, the contractor still hadn’t begun the renovation job. And when he did show up, her contractor was driving a shiny new truck. Costello says her first thought was: “This doesn’t look good.” But she gave him the benefit of the doubt.

After the job was complete, she realized her first instinct may have been an early warning sign. The addition was unlivable due to rainwater leaks, which caused a mold problem. Costello’s mom passed away before the damage could be corrected. “So many things went wrong,” Costello says. 

Each year, homeowners spend $400 billion on renovations designed to increase their comfort, their property value or both. But ask homeowners who have embarked on renovations, and many will have choice stories of surprises (not the good kind) and unexpected costs. Often, they fail to take a few critical steps to protect a renovation project — starting with the contractor, says Ed Brasseur, a licensed general contractor in San Diego for more than 40 years.

“Basically, you’re going to get married to a contractor” for the duration of any home repair or renovation, says Brasseur. Good planning and communication will make that marriage smoother, he says, but it all starts with choosing the right person. 

She thought she hired the right contractor. She was wrong.

Jody Costello was confident she was doing everything right when she hired a licensed contractor in a local design-build firm to add the 1,000-square-foot second story and deck to her home in 2000. Her husband works as a construction estimator. They checked his references and made sure no complaints had been filed against him with the state licensing board.

When things went sideways, she says, “I realized everything we did was wrong, but it was too late.”

She ended up suing her contractor and hiring another to rebuild the addition. It also prompted her to take a deep dive into contractor hiring practices, which led her into an entirely new career as a consumer and policy advocate who teaches home remodeling bootcamps for women.

“This is my life's work,” she says.

Vet a contractor the way you would a surgeon

Costello realized she had failed to check out the first contractor thoroughly.

She and her husband didn’t know that complaints against a contractor may not always be made public until after they’re fully investigated. And the couple didn’t venture beyond the references the contractor provided.

“You need to go deeper,” she says. Searching for her contractor’s name on legal research and business websites would have revealed that he was involved in ongoing litigation with previous clients. Costello also suggests checking with the local building inspector’s office; they may  have relevant information about a contractor they can share.

Brasseur recommends getting bids from three or four contractors — and being wary of high and low bids.

“Someone in the middle is in the comfort zone for me,” he says.

The contractor, at a mimuimum, should also carry enough insurance to cover the cost of rebuilding a house if it burns down, plus workers compensation, adds Dennis D. Gehman, a NARI (National Association of the Remodeling Industry) master certified remodeler in Harleysville, Pennsylvania.

What’s worse than no contract? A bad contract

In Bridgewater, New Jersey, Jonathan Faccone had been flipping houses for about five years when he needed work done on his own home. He turned to a licensed electrician who had worked for him before. Because of their history, Faccone didn’t think twice about giving the man $1,500 up front, without a contract locking in the scope of the work and payment schedule.

Shortly after, the electrician told Faccone he needed to take time off for an emergency. He promised to return the money — but didn’t. Faccone ended up paying another electrician to complete the job and accepted the $1,500 loss as a lesson learned. He now makes sure he has a contract with anyone he hires.

“It’s not that I don’t trust them,” he says, it’s that you never know what might come up.

Costello and her first contractor did sign a contract. When he showed up in the new truck, her gut told her to cut her losses. But when she reviewed the contract, she realized they hadn’t built in protective language. If they fired him, they would be in breach of contract. 

Start with a strong contract

A contract provides a roadmap of what the contractor will be doing — and lays the foundation for any legal action later. State and federal labor and consumer websites can provide suggestions for what to include.

A “deposit” doesn’t mean “paying for work before it’s done”

According to the California Contractors State Licensing Board, contractors cannot ask for a deposit of more than  $1,000 or 10 percent of the project, whichever is less. Other states, however, set higher limits: Maryland, for instance, allows deposits up to one-third of the project price according to information available on the Maryland Department of Labor’s website.

A request for more than 30 percent should be considered a red flag, Gehman says.

Paying for work that hasn’t been completed is the biggest mistake homeowners make, according to Brasseur. “Money is power,” he says. “If you give your power away and your contractor starts messing up, you don’t have the power to get him to perform.”

Be on the lookout for contractor red flags

Changing a light created a cascade of other projects and fixes

Danielle Pientka just wanted to replace the light fixture in the small bathroom of her Columbia, Maryland, home. But that left a hole in the ceiling. Her trusted handyman told her a new ceiling would be cheaper than patching her old popcorn ceiling, and Pientka was happy to invest in a more modern look.

But when the handyman removed the ceiling, 25 years of dryer lint poured out. A four-foot section of the dryer’s exhaust duct was missing, and singe marks told Pientka she had been lucky to avoid a disastrous fire. Because of that, she didn’t mind paying $400 extra for the new ceiling, clean-up and new duct work.

“It was extra money, but not a terrible expense compared to the expense of your whole place burning down,” she says. 

Protect against project creep and other surprises

Situations like Pientka’s are common when renovating, especially in older houses, says Brasseur. “There are always unexpected costs, no matter how much we plan.”

Brasseur suggests that homeowners allot 10 percent of a project’s budget to cover them, he says. If previous renovations have exposed problems, more can be set aside. “For future renovations I made sure to have extra money, because they cut corners building this building,” says Pientka.

Project creep — what Gehman calls the “while we’re at it” syndrome, where homeowners tack on side projects — can also create nasty budget surprises. Additional work orders have made up 19 percent of Gehman’s gross revenue over the last three years. This can be avoided by nailing down all project details — down to the tile choice and light fixtures — before starting. 
 

Trying to save money cost this homeowner a bundle

Benjamin Ross, of McAllen, Texas, was new to real estate investing when he hired a handyman to replace the siding on an Arizona property he had purchased. The man had worked on a friend’s property — and his $1,200 quote for the job was vastly cheaper than the $5,000 to $6,000 licensed contractors had quoted Ross.

The man got the siding on but called Ross to say the power had gone out. The nails he’d used were too long and had pierced the exterior wall and the wiring inside, ruining the circuit. The man did not own up to the damage and demanded to be paid; Ross refused.

Ross had to pay $600 to have the electrical system fixed, and another $2,000 to have his siding repaired. This time, he went with a licensed contractor. The cheapest option isn’t always the best one, he says. “It sure was a lot of headache, a lot of stress and a lot of life disruption,” he adds. 

Hire the right person for the job

Handymen are often cheaper than contractors and, like Pientke’s, can do fine work. But no one has verified their skills and training, since they aren’t licensed. Many states limit the work handymen can do: In Arizona, for example, anyone doing more than $1,000 in home repair work (or work that requires a permit) needs a license, but Ross wasn’t aware of that at the time.

Gehman adds that hiring a licensed contractor means there is at least a third party involved, such as the licensing board or regulator.  In addition, contractors who are members of professional organizations like the National Association of Home Builders or NARI (where Gehman serves as treasurer), are held to those organizations’ ethics codes.

Even the best projects can go bad

Jason Gola was nearing the end of a DIY renovation of his Schnecksville, Pennsylvania, home’s master bathroom. Things had gone smoothly, thanks to Gola's training as an electrician and his professional construction experience.

But as he laid the last tile, he heard a faint meow and realized with horror that it was coming from beneath his feet. He’d tiled the couple’s kitten, Louie, under the floor.

Unable to face ripping up the tile he had just set, he called his wife, who told him, “Do whatever you need to do; get the cat out!” The tile came up, and Louie was rescued. The cost: “one floor and a whole lot of swear words,” Ann Gola says.

Whether hiring a professional to build a six-figure addition or entrusting a spouse to renovate the bathroom, go into home renovations expecting the unexpected, Brasseur says.

“With contractors, plan for the worst and hope for the best is typically how you approach it,” says Brasseur. Often, what matters most is who you have on your team during the renovation, he adds. “The truth is, it can come down to saying, ‘I trust this person.’ ”

Written by

Kelly Burch

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