Red Flags to Check Before Hiring a General Contractor

You’re about to spend tens of thousands of dollars — maybe more — on a renovation that’s going to turn your life upside down for weeks or months. The contractor you choose will be in your home, making decisions that affect your family’s safety, comfort, and finances.

And yet most homeowners spend more time researching a $500 appliance than they do vetting a $50,000 contractor.

Start with a structured interview. The companion guide on questions to ask before hiring a contractor gives you the baseline questions; this guide focuses on the answers and behaviors that should make you slow down or walk away.

I get it. The process is overwhelming. You’re excited to get started. The contractor seems nice. They showed up on time and gave you a reasonable price. But here’s the thing: the red flags that lead to disastrous projects are almost always visible before you sign the contract — if you know what to look for.

Let me walk you through the warning signs that matter, starting with the most important and working down to the subtle ones most homeowners miss.

No verifiable license

This is the biggest red flag there is. If a contractor can’t produce a valid license number that you can verify through your state’s licensing board, do not hire them.

Every state has different licensing requirements. Some require general contractors to be licensed. Some only require licenses for specific trades — electrical, plumbing, HVAC. Some have no statewide licensing at all and leave it to local jurisdictions.

But regardless of where you live, a contractor who is licensed has met minimum standards. They’ve passed an exam, shown proof of experience, carried insurance, and submitted to the authority of the licensing board. A contractor who isn’t licensed has done none of those things.

How to check: Ask for the contractor’s full legal name and license number. Look up the license on your state’s contractor licensing board website. Confirm the license is active, not expired or under disciplinary action. Make sure the name on the license matches the business name you’re dealing with. If a contractor says “I’m licensed but I don’t have the number handy,” that’s a red flag. If they say “You don’t need to check, I’m legit,” that’s a bigger red flag.

If you want the slower version of this step, use the contractor license and bond guide before you compare bids.

What to watch for: A license that’s expired. A license under a different business name (this can be a sign of “borrowing” someone else’s license). A license that covers a narrower scope of work than what you’re hiring them for. A contractor who asks you to pull the permits yourself — this often means they aren’t licensed to pull them.

Missing or inadequate insurance

A contractor without proper insurance is a gamble you don’t want to take. If a worker gets injured on your property and the contractor doesn’t have workers’ compensation insurance, you could be held liable for their medical bills and lost wages. If the contractor damages your house — or your neighbor’s house — and they don’t have general liability insurance, you’re paying for the repairs.

How to check: Ask for a Certificate of Insurance (COI) issued directly by the contractor’s insurance company. Not a photocopy. Not a screenshot of an email. An actual COI from the insurer.

Look for three things:

General liability insurance. This covers property damage and bodily injury caused by the contractor’s work. Minimum coverage should be $1 million per occurrence and $2 million aggregate. The policy dates should cover the entire project timeline. And the business name on the policy should match the contractor you’re hiring.

Workers’ compensation insurance. This covers injuries to the contractor’s employees while they’re working on your project. If a contractor has employees and no workers’ comp, you’re exposed. The only exception is if the contractor is a sole proprietor with no employees — in that case, workers’ comp may not be required, but they should still have health insurance and disability coverage.

Additional insured endorsement. This is a technical detail that matters a lot. Ask to be named as an “additional insured” on the contractor’s policy. This means the insurance company treats you as if you’re insured under the policy for claims arising from the contractor’s work. It’s standard practice and any good contractor will do it without pushback.

What to watch for: A contractor who says “don’t worry, I’m insured” but can’t produce a COI. A COI that’s expired or expires before your project is done. A COI with low coverage limits. A contractor who has workers’ comp but no general liability — or vice versa. A contractor who balks at naming you as an additional insured.

Vague or missing references

Every contractor should be able to provide references from recent, similar projects. If they can’t, or if the references they provide are evasive, consider it a red flag.

How to check: Ask for at least three references from projects completed in the last year that are similar in size and scope to yours. Call each reference and ask specific questions:

• Was the project completed on time and on budget?
• How did the contractor handle unexpected issues?
• Was the work site kept clean and safe?
• How was communication throughout the project?
• Would you hire them again?
• What would you have done differently?

If a reference hesitates, gives one-word answers, or says “it was fine” without enthusiasm, pay attention. People who had a great experience with their contractor will tell you about it. People who had a bad experience will either avoid answering or give vague responses.

What to watch for: References that are all from projects more than five years old. References that are clearly friends or family. A contractor who says “I don’t keep track of past clients” or “my clients value their privacy.” A contractor who provides photos of work but can’t put you in touch with the homeowners.

High-pressure sales tactics

A contractor who pressures you to sign quickly is a contractor who doesn’t want you to think too hard about what you’re signing.

The signs: “I can give you this price today only.” “I have another client ready to take this slot.” “If we don’t start next week, the timeline won’t work.” “Just sign and we’ll work out the details later.”

If the pressure is tied to a suspiciously cheap number, pause and compare it against why the lowest contractor bid is hard to compare. A low bid is not always bad, but a rushed low bid is rarely where you want to start.

These are all pressure tactics designed to get you to commit before you’ve done your due diligence.

How to handle it: Take the pressure as a signal to slow down. A legitimate contractor will give you time to review the contract, check references, and think about the decision. If the deal really is only good for today, it’s not a deal worth taking.

What to watch for: A contractor who wants a signature before they’ve provided a written contract. A contractor who insists on a verbal agreement or a handshake deal. A contractor who says “we can sort out the details as we go” — no, you can’t. The details should be sorted out before you sign.

Payment terms that favor the contractor

The way a contractor wants to be paid tells you a lot about their business practices.

Red flag payment terms:

• Asking for 50% or more of the total cost upfront
• Asking for cash payments
• A payment schedule that isn’t tied to specific milestones
• Requiring full payment before the project is complete
• No mention of lien waivers in the payment terms
• A vague schedule like “50% down, 50% on completion” with nothing in between

How to handle it: The industry standard for a deposit is 10-15% of the total contract price. Progress payments should be tied to verifiable milestones. The final payment — typically 10-15% — should be held until the project is complete and you’ve signed off on the punch list.

For a cleaner way to compare draw schedules, read the guide to payment schedules and draw requests before you approve the contract.

If a contractor pushes back on reasonable payment terms, that’s a red flag. A well-capitalized contractor with good cash flow doesn’t need your money upfront to buy materials. They have credit lines and supplier accounts. If they need 50% down to start your project, that tells you something about their financial situation.

A one-page contract

Your construction contract should be detailed, specific, and several pages long. A one-page “agreement” that barely covers the basics is not a contract — it’s a receipt.

What a good contract includes:

• Detailed scope of work with specific materials, finishes, and quantities
• A complete payment schedule tied to milestones
• A clear change order process — written, signed by both parties
• A start date and a completion date (or a process for establishing one)
• Permit responsibilities — who pulls them, who pays for them
• Warranty terms — what’s covered and for how long
• A lien waiver requirement — contractor must provide waivers with each payment
• Termination clauses — what happens if either party needs to end the agreement
• Dispute resolution — mediation, arbitration, or litigation
• An exclusions list — clearly stating what’s NOT included

The contract should answer the same basics covered in what should be in a remodeling contract: scope, payment, change orders, permits, warranty, exclusions, and signatures.

What to watch for: A contract that says “see attached scope” but the scope is a paragraph long. A contract that uses vague language like “standard materials” or “as needed.” A contract that has no address, no dates, and no signatures. A contractor who says “my word is my bond, we don’t need a contract.”

The contractor who says “no permit needed”

A contractor who tells you a permit isn’t required for work that clearly needs one is either uninformed, cutting corners, or planning to work illegally. None of those are good options.

Some minor work genuinely doesn’t require a permit — paint, flooring, cabinet replacement. But structural work, electrical, plumbing, HVAC, decks, and additions almost always do. If your contractor says “we don’t need a permit for that,” ask your local building department before you accept that answer.

If the answer is still fuzzy, compare their explanation against the contractor permit rules guide before work starts.

What to watch for: The contractor who says permits are “too expensive” or “slow everything down.” The contractor who says “we’ve done this a hundred times without a permit.” The contractor who asks you to pull the permit yourself. The contractor who says the work is just a “repair” when it’s clearly a replacement.

Unrealistic timelines

If a contractor promises to finish a major kitchen remodel in two weeks, something is off. Construction takes time — especially when you factor in inspections, material deliveries, and the coordination of multiple trades.

What to watch for: A timeline that seems too good to be true (it probably is). A contractor who can’t explain how they’ll achieve the timeline they’re promising. A contractor who has no buffer for weather or material delays. A contractor who says they’ll start immediately but hasn’t checked permit timelines.

A good contractor will give you a realistic timeline that includes time for permitting, inspections, material lead times, and unexpected conditions. They’ll explain the critical path — which trades need to work in which order — and they’ll be honest about what could push the schedule.

For a more detailed timeline review, use how to compare contractor timelines before you treat the fastest start date as the best bid.

Poor communication during the bidding process

The way a contractor communicates before you hire them is a preview of how they’ll communicate during the project. If they’re hard to reach, vague in their responses, or slow to provide information during the bidding process, expect more of the same once they’re on the job.

What to watch for: A contractor who doesn’t return calls or emails promptly. A contractor who can’t answer your questions clearly. A contractor who seems annoyed by your questions. A contractor who provides an estimate with no supporting detail.

Good communication habits include: responding within 24 hours, providing clear written estimates, answering questions thoroughly, and being willing to walk you through their bid and process.

If the estimate feels thin, build your own checklist from the homeowner scope document guide so every bidder is pricing the same work.

No portfolio of similar work

A contractor should be able to show you examples of work they’ve done that’s similar to what you’re hiring them for. If they specialize in bathroom remodels and you’re hiring them for a bathroom remodel, they should have photos, references, and examples.

What to watch for: A contractor whose portfolio is all new construction when you need a remodel. A contractor whose photos look like stock images. A contractor who says “I don’t take photos of my work.” A contractor who can’t describe their process for a project like yours.

The bottom line on red flags

No contractor is perfect. Every contractor has had a project go sideways, a client they didn’t click with, a mistake they had to fix. But the red flags I’ve listed here aren’t about perfection — they’re about patterns.

A single red flag might be explainable. “I just let my license lapse but I’m renewing it next week” — that happens. But multiple red flags, especially the serious ones like no license or no insurance, should be deal-breakers.

Trust your gut. If something feels off during the bidding process, it’s probably going to feel worse during the project. It’s easier to walk away from a contractor before you sign than it is to recover from a bad contractor after you’ve paid them.

If payment and paperwork are the sticking points, read how liens work and how to avoid them and final payment checks before you release the last draw.

Quick Answers

Q: How many bids should I get before hiring a contractor?

Three is the standard recommendation. Get bids from at least three contractors for any project over $5,000. This gives you a sense of the price range and lets you compare scope, communication, and approach — not just price.

Q: Is the lowest bid always a red flag?

Not always, but it deserves scrutiny. A significantly lower bid usually means one of three things: the contractor missed something in the scope, they’re using cheaper materials or methods, or they’re desperate for work. Any of those can lead to problems. Ask the low bidder to explain how they arrived at their number.

Q: Can I negotiate the contract terms?

Yes. Everything in a construction contract is negotiable — the price, the payment schedule, the timeline, the scope. If a contractor refuses to negotiate any terms, that’s a red flag. A collaboration starts with collaboration.

Q: What if the contractor is a friend or family member?

Hiring someone you know adds a personal dimension that can be complicated. The same red flags apply — don’t skip the contract, don’t skip the license check, don’t skip the insurance verification. A written agreement protects both of you, and a real friend will understand that.

Q: How long should I keep the contractor’s documentation?

Keep everything — the contract, all change orders, all payment receipts, all lien waivers, all warranty documents, and all project photos — for at least as long as the warranty period. For major structural work, keep them indefinitely. You’ll want them when you sell the house.

Q: What if I already signed and found red flags?

You’re not stuck. If you discover a red flag after signing but before work starts, you can try to cancel the contract. Review the cancellation terms in your contract. If the contractor has a right to cancel or if both parties can cancel by mutual agreement, exercise it. If not, a conversation with a lawyer can help you understand your options. The cost of getting out of a bad contract is usually less than the cost of living through a bad project.