The best way to avoid problems in your basement finishing project is to follow these ten steps, and to cover all details in your contract.

  1. Bids
    A bid is an offer to do work. It is advisable to get at least three written bids using identical plans and specifications so you can compare prices and contractors.Solicit at least three bids for the work you need; do not automatically accept the lowest. If you are like most homeowners, you may not be familiar with the current price of building materials and labor costs. The three-bid rule helps you decide if the bids are reasonable or not.

    Make sure all bids are based on the same set of specifications, materials, and scope of work. Discuss the bids in detail with each contractor, and make sure you understand the reasons for any variations in price. Sometimes a higher price may be worth it, if the materials to be used are of higher quality or the work is more extensive. For example, if you are having your kitchen remodeled, and one bid is based on installing prefabricated cabinets in standard sizes while another is based on installing custom-made cabinets, the prices will not be comparable.

    Please note: A license number on a bid or contract does not necessarily mean the license is valid. Although an unlicensed contractor may give you a low bid, the risks of possible financial and legal consequences you may face outweigh any benefits a lower bid may seem to offer. Beware of any bid substantially lower than the others. It probably indicates that the contractor has made a mistake or is not including all the work quoted by his or her competitors. You may be headed for a dispute with your contractor if you accept an abnormally low bid. Don’t forget the old adage, “If the offer sounds too good to be true, it probably is!


    Check the Contractor’s License

    Is the contractor properly licensed? Unlicensed contractors pose a risk to your financial security because they expose you to significant financial harm in the event of injury or property damage. Few unlicensed contractors have bonding or workers’ compensation insurance.

    If you contract with someone who does not have a license, the only remedies for problems may be available only in civil court. This is one more good reason to work only with licensed contractors! Another consideration is that unlicensed contractors may not have the expertise and qualifications to do the job right the first time. You could end up having to hire a licensed, reputable contractor to correct the work—and paying for the job twice.


    Check the Contractor’s References

    One of the best ways to select a licensed contractor is to seek out personal recommendations from friends or relatives who recently had similar projects completed and were satisfied with the job.

    Ask the contractor for local references, and call them to see if they were satisfied with the contractor’s work. Unfortunately, do to everyone’s hectic schedules, it is sometimes very difficult to get a hold of references, so ask the contractor if they have completed customer surveys that you could read through and base the need to call and speak with references on the level of comfort you obtained after reading thru 10 or more completed surveys. Skilled contractors will be proud to take credit for their work. Remember, the person you hire to work in your home will be in and around your home until the job is completed.

    When speaking to the contractor’s customers, ask such questions as: Did the contractor keep to the schedule and the contract terms? Were you pleased with the work and the way it was done? Did the contractor listen to you when you had a problem, and seem concerned about resolving it? Did the contractor willingly make any necessary corrections?

    You may also wish to check the contractor out with your local building department, trade association, local consumer protection agency, consumer fraud unit in your city or district attorney’s office, and the Better Business Bureau. Call these organizations to see if they have information about the contractor you are considering.

    Ask the contractor for the address of his or her business location and business telephone number, and verify them. A contractor who operates a business out of the back of a pickup truck with a cellular telephone may be difficult to find to complete a job or fix something that has gone wrong after the last bill is paid, if he does not have a fixed business location then ask for his home address.

    Don’t be fooled or pressured by a smooth-talking salesperson. Take the time and effort to make sure that the person or business doing your home improvement is going to perform in a professional manner.


    Make sure the contractor has Workers’ Compensation and liability insurance coverage

    Ask the contractor and verify if the company is insured against claims covering workers’ compensation, property damage, and personal liability in case of accidents. Ask to see a copy of the certificate of insurance, or ask for the name of the contractor’s insurance carrier and agency to verify that the contractor has the insurance.

    Licensed contractors are not required to carry general liability insurance; however, they must include in the written contract a form about liability insurance.

    Home improvement contractors must tell you whether or not they carry general liability insurance and that it will protect against third-party bodily injury and property damage. If uninsured, they should be able to explain how they would cover losses that would ordinarily be covered by insurance.

    If your contractor damages your property and doesn’t carry general liability insurance, you or your insurance policy could end up paying for damages.

    In most states, if a contractor has employees, workers’ compensation insurance coverage is required by law. This is important for you as a homeowner. If a worker is injured working on your property and the contractor doesn’t have insurance, you could be asked to pay for injuries and rehabilitation through your homeowner’s insurance policy. Don’t let your insurance become your contractor’s workers’ compensation insurance coverage!



    Some bonds are designed to protect you against Sub-standard work that does not comply with local building codes. Bonds do not assure the financial or professional integrity or competency of a contractor. Institutional lenders such as savings and loans, insurance companies or commercial banks generally require contractors to secure bonds for large jobs.

    Bonds may be classified as:

    Contractor’s License Bonds — Contractors are required to have a contractor’s license bond of $10,000.

    This bond is not a guarantee of performance or competence, or of the contractor’s financial responsibility. In fact, this bond is often not enough to cover the multiple complaints that could be made against it.

    Contract Bonds — a contract bond guarantees both job completion and payment of all labor and materials. In general, the bonding company will not have to pay more than the face amount of the bond.

    Bonding requirements may keep a new contractor or a contractor with a poor track record from bidding on desired jobs. Bonding companies will not take a risk without verifying the technical and resource capabilities of the contractor. For a contracting business to qualify for bonding, it must practice sound business techniques.

Read part 3 “The Contract”