How to Vet a General Contractor: 5 Red Flags + the 10-15% Upfront Rule

Most contractor disasters share the same fingerprint: a homeowner who handed over a deposit before asking five basic questions, and a contractor who counted on them not asking. This guide is the checklist that prevents that.

The 5 questions every contractor should answer in writing

1. State license number — and a way to verify it

Texas, Colorado, Arizona, North Carolina, and Tennessee all license general contractors at the state or city level. A reputable contractor will hand you their license number without hesitation and tell you exactly which board issued it. You verify it yourself — never take a screenshot at face value. Each state runs a free public lookup; takes 60 seconds.

2. Liability insurance proof — the actual COI

Ask for the Certificate of Insurance (COI) with you listed as an additional insured. “I’m insured” isn’t a yes — the COI is. Minimum $1M general liability is table-stakes for any kitchen-or-larger project; $2M for additions and roofing.

3. Workers’ comp coverage

If a worker is injured on your property and the contractor doesn’t carry workers’ comp, you can be the next defendant. This is a hard line, especially in Sun Belt metros where day-laborer crews are common. Get the COI here too.

4. Written contract before any payment

Scope, materials, timeline, payment schedule, change-order process, and a clear warranty — in writing, signed by both sides. The contract names the GC and any major subs. No contract, no deposit. No exceptions.

5. Permits — pulled by the contractor, not you

For anything structural, electrical, plumbing, or HVAC, permits are pulled by the contractor and inspected by the city. A contractor who suggests “skipping the permit to save money” is offering to make you legally liable for unpermitted work and uninsurable in the event of a fire or claim. Permit costs typically run $400–$2,200 depending on scope and city.

The 10–15% upfront rule

On a residential remodel, a contractor should ask for no more than 10–15% of the total contract value as a deposit. The rest pays out against milestones spelled out in the contract — e.g. 25% at rough-in completion, 25% at drywall, 25% at finish work, final 15–25% at punch-list signoff.

A contractor asking for 50% upfront is either underwater (and using your deposit to finish someone else’s job) or planning to disappear. Walk away. The honest contractors don’t need it.

5 red flags that should kill the conversation

1. Cash only. Legitimate contractors invoice. Cash-only is a tax-evasion or no-paper-trail signal — and you’ll have no recourse if something goes wrong.
2. No physical address. A PO box and a cell phone is a contractor who can disappear in 24 hours. Real businesses have a verifiable address.
3. Same-day pressure to sign. “This price is only good today” is the oldest pressure tactic in the trades. A real estimate is good for at least 7–14 days.
4. Refusal to pull permits. See item 5 above — this is non-negotiable.
5. No written estimate. If they can’t put it on paper, they don’t intend to be held to it.

How rates work, and what “cheaper” really means

For reference, the national rate range for general contractors and their sub-trades in 2024:

• Carpenters: $15–$150/hr depending on specialty (rough framing vs finish work)
• Electricians: $50–$100/hr, ~$300 average per typical hire, $70 minimum service fee
• Plumbers: $45–$200/hr, ~$300 average service call
• Project-level GC ranges: $250 (small fix) to $58,000 (whole-home oversight)

A contractor 30% below the local typical isn’t a deal — they’re cutting something. Usually insurance, permits, or subcontractor wages. Sometimes all three.

What you should do this week

1. Make a shortlist of 3 contractors in your metro from our directory — every listing is 4.0+ rated and shows a pricing transparency score.
2. Send each one this email: “Hi, before we schedule a walkthrough, can you send me your state license number, COI for general liability + workers’ comp, and a sample contract? I’m doing initial vetting on three contractors.”
3. Whoever responds with all three within 48 hours is who you give the walkthrough to. The ones who delay or push back are the ones who’d give you a 50%-upfront contract too.

Sources: HomeAdvisor — General Contractor Costs; state licensing boards (TX, CO, AZ, NC, TN). Industry-standard upfront and milestone payment structures are confirmed by the National Association of the Remodeling Industry (NARI).