The Ultimate Contractor Vetting Checklist
Finding the right contractor is as critical as finding the right deal. A bad contractor can sink your project's budget and timeline. This guide provides a systematic approach to vetting and hiring reliable professionals for your real estate investment projects.
License & Insurance
- Verify General Contractor's license with the state licensing board (e.g., Virginia DPOR).
- Confirm their business is registered and in good standing with the Secretary of State.
- Obtain a Certificate of Insurance (COI) showing General Liability coverage (min. $1 million).
- Verify Workers' Compensation insurance is active for all their employees.
- Ensure your property is named as an 'additional insured' on their policy.
References & Reputation
- Request and contact at least 3-5 recent references for similar projects.
- Ask references about communication, budget adherence, timeline, and quality of work.
- Check online reviews on platforms like Google, Yelp, and the Better Business Bureau (BBB).
- Look for a professional website and online presence.
Scope of Work (SOW)
- Provide a detailed, written Scope of Work (SOW) for the contractor to bid on.
- Ensure the contractor's bid is itemized and aligns with your SOW.
- Clarify what materials are included (builder-grade, custom, etc.).
- Define a clear process for handling change orders, including cost and time implications.
Contract & Payments
- Review the contract thoroughly. Vague contracts are a major red flag.
- The contract should include the full SOW, project timeline, and total cost.
- Establish a clear draw schedule tied to project milestones, not arbitrary dates.
- Never pay more than 10-15% upfront. The final payment (at least 10%) should be held until the project is 100% complete.
- Specify the use of lien waivers, requiring them from the GC and major subcontractors upon payment.
Common Red Flags
- Unusually low bids compared to others.
- High-pressure sales tactics or demands for a large upfront payment.
- Lack of a physical business address or professional online presence.
- Hesitation to provide license, insurance, or references.
- Vague or verbal-only agreements.
Why This Matters
Properly vetting a contractor is the single most important step in risk mitigation for a rehab project. It protects you from financial loss, legal trouble, and project delays. Harvey Capital Funding requires a vetted General Contractor and a detailed SOW for our fix and flip loans because we know it's the foundation of a successful investment.