Don't hire a contractor who can't, or won't, finish your job!

I have seen these claims, and hundreds more over the years. Some are true, and some are manipulations of words and facts, sometimes they are even total untruths!  There is no doubt that experience is a good thing!  But how do you go about checking out a Builder or General Contractor's claims?   With the advent of the internet it has become easier to not only check out the claims, but check out a service providers background.  All it takes is a little know how and searching. What you can not find on the internet you can find from phone calls to the various agencies that control or oversee these type of activities. It's up to you to make sure the person you are about to hire, and hand over large sums of money to, really are who they state, and what they claim is true! The sad part about all of the untruths is that it tarnishes the image of those who are experienced.

What is a license? 

Before we talk about how to validate their claims we need to understand the licensing laws for Builders and GC's.  Licensing implies that a person, or entity, has been given permission to do something that others, that are not licensed, can not do.  Licensing also entails laws and rules which are generally controlled by the state or local governments.  It is important to distinguish between a "Professional" (Occupational) license and a "Business License".  A "Professional License" is awarded to a person who meets specific criteria related to the "profession" that they are practicing.  A very good example of this is an Electrical Contractor who must first attend many courses of study, and then takes an examination to determine their competency to install and repair electrical systems.  If they meet all of their requirements, they are issued a license to practice as an Electrical Contractor. A "Business License" is also issued and controlled by a governmental agency and allows a person, group of people, or an entity to offer products, services or perform specific actions that the governmental agency deems a necessity to regulate.  A "Business License" may, or might not, have substantial requirements for the applicant to meet in order to be awarded that license.  For example to operate a General Contracting business you must be licensed by the local municipalities you will be providing services in.  The only purpose of the license is to monitor your business activities, not your actual performance activities, and ensure you are paying the appropriate taxes, etc.  There are no skills required to obtain this type of "Business License" and anyone can obtain one.  Currently the State of Texas has no business license requirements except for some specialized professions.

Licensing is a very important concept to understand as in the State of Texas there are no state laws, nor requirement, for Builders or GC's to obtain a "Professional License".  Additionally there are no local, county or state agencies, with some possible and remote exceptions, that require a Builder or GC to demonstrate full competency in their field to obtain a Business License.  It is unfortunate that many Builders and GC's use the term "I am licensed with..." in their advertisements and dealings.  Even when the Texas Residential Construction Commission (TRCC) was in existence they did not license Builders or GC's.  The TRCC merely maintained a registration system for Builders and GC's.  To obtain your registration certificate from the TRCC only required a pen to fill out the application, and a check to pay the registration fee.  It is quite a sad fact that the beautician/cosmetologist/barber that is entrusted to provide you a $25 hair cut is required to demonstrate competency and be licensed.  Yet the person entrusted to safely and properly build your $250,000.00 home has no governmentaly mandated competency requirements nor professional licensing requirements!

What are the consequences of hiring an unlicensed builder or GC?

Another very important consideration of using unlicensed builders and GC's is the lack of support you might receive from your local, county or State officials.  These officials generally have control over properly licensed persons conducting business under their jurisdictions.  Many times these officials have little authority to chase down and prosecute unlicensed persons on their own.  In addition their resources to even do that are limited.  The response you will often hear from these officials is that you should speak with an attorney about what your options are.   A builder or a GC that does not obtain and maintain proper licenses is either ignorant of the laws and requirements or is purposely violating them.  If it is a case of ignorance there is the very important question of how many other areas of responsibility are they ignorant of?  Does the builder or GC know what the required building codes are?  Do they know anything about the subcontractors they are using?  Do they even know how to run a business?  If it is a case of purposely violating the laws, then what makes you think they will perform the work properly?  If you have a problem with the work, what makes you think they will be there to stand behind their guarantee and fix the issues? Using unlicensed, or improperly licensed, builders and GC's is a recipe for disaster and places you in a potentially bad financial predicament.  The builder or GC is most likely not insured, or properly insured, to cover their mistakes, injuries of the workers on the job, damage to your property they cause, etc., etc.  To make a low bid on your job they are most likely also using unreputable, uninsured subcontractors who pose additional threats to your financial well being.  When these unreputable people find themselves in financial trouble they will most likely not pay their subcontractors who can then come back on you later to pay a second time for the work.  If they or their subcontractors injure themselves on your property then your homeowner's insurance is a clear target to pay for their mistakes.

  
Why is it important to ask a lot of questions from the builder or GC I am about to choose?

Click the image for a discussion on the questions to ask!

You are getting ready to enter into a contract to build a home, or perform a GC function such as a major remodel, you will be paying on for quite some time.  If you want to research your potential builder/GC's background and credentials you need more information. The more information you can obtain, the better are your chances of finding the truth. Questioning the builder or GC allows you to gather the information you will need to put on your detective's hat and separate the fact from the fiction.   You've already found many sources that tell you what to look for in a builder or GC, and what questions to ask.  All of those nice articles, and handy "how to choose a builder/GC" guides you read were a good starting point for generating your list of questions. Unfortunately they are not only incomplete, but they also are so standard that the less than honest builder or GC is already prepared to answer with what sounds like credible answers.  So what questions should you ask?  That is a subject all in its own and I have created a separate page listing and explaining some potential questions and a method to ask them.  Click the image to the left to access that page.

How do I check out all of the information I just gathered?

Now you get to put on your detective hat and do a little research on the Builder/GC.  If all of your questions were answered you should have enough information to at least perform a good, and rudimentary check.  What you are checking for are the existance of references to the Builder/GC, whether good or bad.  Sometimes the absence of any negative information is good, you know "No news is good news".  Also keep in mind that people are more willing to take the time to post criticisms and complaints than they are to post good reviews, thanks and praise.  However, if all you are finding is bad, and a lot of it, then there is obviously a problem and quite possibly time to walk away from that Builder/GC and go to another selection. We will approach the search using multiple steps.  First we will start with the easiest and most reliable steps to check some of the information gathered.  From there we will progress to more intensive searching.  At any point in time if you feel you have seen enough to make you uneasy and not want to use the person or business' services then don't bother going any further.  Each sucessive step will require more effort than the last.

How to verify the business license status.

Before we look at the Builder/GC's business license status it is important to understand business licensing in Texas.  To legally use the words or designations of Corporation (or derivatives such as Corp., Incorporated (Inc.)), Limited Liability Company (LLC), Professional Liability Company (PLC) or the many other variations and designations displaying incorporation the company must file appropriate paperwork with the Texas Secretary of State (SOS), pay the required fees and maintain their tax status current.  For a fee you can access their information online. or for free you can call or email them with their contact information located at this WEB site "Click Here".  If a company is claiming incorporation check their status out.  Also, every company, with very few exceptions, that has incorporated in the State of Texas is also required to register and pay taxes with the Texas Comptroller of Public Accounts.  You can view their status at this WEB page "Click Here".  If a company is inappropriately using one of the incorporation designations and/or not properly registered with the Comptroller I would certainly think twice about using this company.  That is a clear signal to me that this company is either ignorant of the laws or is choosing to ignore them.

Even though a company does not incorporate with the State of Texas does not mean they are free to operate at will.  Most every county in Texas, as well as the vast majority of cities and municipalities, require any company operating in its jurisdiction to register their "Doing Business As" (DBA) name if they are not incorporated with the State of Texas.  This allows the local counties, cities and municipalities the ability to monitor, collect any taxes from, and take other actions against, companies that they deem necessary.  If your Builder/GC is not incorporated you should call both your local city and county to determine if they are properly registered with them.  Some cities and counties might also have a search function on their WEB site that you might be able to use.  In addition to registering the DBA, the local city or county might also have a requirement for businesses that perform any type of residential work to also have a special Builder/GC license, might also require professionally licensed trades to submit their state license information, etc.    

If the Builder/GC is not properly registered I would strongly urge you not to use their services.  A business that does not follow proper rules and laws most likely will not be there if you have a problem afterwards.  It is also very possible that your project will require proper permitting by local or county officials.  Unlicensed and unregistered businesses will not be able to obtain permits and your project can become a major issue with the local permitting authorities later.  These businesses also fall under a gray area as far as enforcement and many times your problems with them can only be handled by litigation (lawsuits) which can be costly and time consuming.  

Checking the Professional license status.

The importance of checking out licensure is for your own protection.  A properly licensed individual professional or business is now under the scrutiny of the license agency issuing the license.  If worse comes to worse you can file a complaint with that agency and possibly have action taken, even if it is just revoking the license. However, if you use unlicensed or improperly licensed/registered people or businesses then those agencies will generally take little or no action, and instead refer you to your attorney or local law enforcement. Texas licensing agencies have limited power to prosecute unlicensed people performing professional services.  They have no real power to help you secure any judgement or money if a Builder/GC does not perform.  However many professionals and business' will think twice about handling your complaints properly if they face possibly loss of license or other administrative actions against them.  It goes without saying that the unlicensed people and business simply don't care about your complaint and will continue operating until caught in an illegal act. If you recall, there are no professional licenses for Builder/GC's in Texas.  However if a Builder/GC claims to have other professional licenses you should verify these.  There are some Builder/GC's that will list old or non-existent licenses in order to inflate their image.  To verify the professional license status will require checking with the various agencies that license these individuals.  Most all of these have a search function on their WEB site and those that do not will answer your questions via telephone or email.  You will need the full name and usually their home and/or business address city.  A list of Texas State licensing agencies can be found on my WEB page by clicking here.

As you can see the list of trades and professional licenses in Texas is very short.  Texas is close to a Wild West state when it comes to licensing of any building or building related trades.  Notice many of the other trades that are not licensed in Texas such as framers (carpenters), brick masons, foundation construction and concrete people, roofers, etc., etc.  For these people you have to rely on your Builder/GC to hire the right person who knows what they are doing.

Checking the Builder/GC's insurance information.

By now you should already have collected the Builder/GC's insurance information.  You can ask for a copy of their policy displaying coverages and amounts but most likely you will not receive it.  Generally the most any Builder/GC provides is a simple "Statement of Coverage" from their insurance provider to give to prospective clients that ask for the information.  In defense of the good Builder/GC's, we are in a litigious society and providing in depth information such as this paints a target on their back for the sheisters and scammers who have every intention of finding a deap pockets Builder/GC to sue, regardless of how well they did on the job.   Insurances for business come in many diffferent flavors, sizes and varieties.  Some specific insurance packages come with "Riders" that cover more than that specific type of insurance normally covers.  We could spend pages just talking about what each type of insurance is, what it might or might nover cover, etc., etc.  Instead we will discuss the types of protection you should be looking for.  With this you can then check the Builder/GC's insurance policy coverage, whatever flavor or type it is, to see if you are protected.  After each item I will make a note as to which type of insurance usually covers this loss or issue.

Damage or injury to you or your property during the job - During a new home build most times this does not concern you if you are not using a construction loan during the build process, such as buying a home from a large tract builder.  You don't own the land or materials being used, you have no current loan out that hinges on this, and the issues all fall on the builder to correct.  The builder also realizes if you are hurt while on the site during build that they can be held liable for it as well.  If you are using a construction loan, or are having a addition/remodel/etc. performed then this is a very important coverage.  This is generally handled by "General Liability" (GL) insurance.  Be careful about GL insurance as it might not cover everything.  For example, if the Builder/GC runs into you or the structure with their vehicle the GL policy might have an exclusion requiring the Builder/GC use their vehicle insurance policy to cover any damages that arise.  If the vehicle policy is weak you could be out altogether!  Another important point is the GL policy might not cover the Builder/GC's subcontractors or their work. The Builder/GC might be covered but they are many times not performing the work.  Make sure either the Builder/GC's GL is covering all subcontractors or any subcontractors used on your job are covered under their own policies.

Incidental damages to surrounding properties, systems, etc. -  Most GL policies cover the immediate project area and will disclaim damages caused by the Builder/GC to anything outside of that scope.  For example during the build a fire is started and breaches the property boundaries where it burns other homes?  Or chemicals and/or materials used during the work contaminate the area, possibly even nearby areas?  These things might not happen on a regular basis but do happen and should be considered.  If the Builder/GC lacks insurance to cover these incidents it could wind up as a claim against your homeowner's policy, if you even have one.  These types of incidents are usually handled under "Umbrella Coverage" type policies that pick up where other policies leave off.

Injury to the Builder/GC's employees and any subcontractors -  Work related accidents happen quite frequently on job sites, and many can be extremely serious!  Some serious enough to mame, kill, or otherwise remove a person from their job for extended periods of time. Many consumers do not understand what liabilities they have open to them when this occurs.  If you own the property and are building on a construction related loan, or if this is a expansion/remodel/etc. of an existing property then you might get a very nasty surprise when the injured worker attempts to collect compensation from you the owner.  If you have insurance on the property the injured worker might attempt to make a claim against it to collect money.  You need to make sure that the Builder/GC has insurance to cover for their employees as well as subcontractors and their employees.  If they do not cover their subcontractors make sure the subcontractors have the proper insurance.  These incidents are generally handled under the "Workmans Compensation" type of insurances.

Performance related incidents -  In the event the Builder/GC fails in their duties to complete your project, or the project starts to climb above the quoted costs unecessarily, or the Builder/GC fails to pay their subcontractors, you might have a difficult time collecting for any damages, etc. related to their poor performance.  Also if they are not paying subcontractors then the subcontractors might come back on you and file liens against your home for payment, even though you might already have paid the Builder/GC.  This type of situation happens more often than many are aware of.  For example your Builder/GC just stops working on the project and leaves you hanging after having already paid a great deal of money for the project.  At this point, without any type of insurance, your only option is to take the Builder/GC to court.  This type of coverage is not really an insurance policy but instead called a "Construction Surety Bond", or a "Performance Bond".

Now you know what to look for and with this information you can call up the insurance provider for the Builder/GC and ask the following questions:


All Builder/GC's want to have a clean insurance record with no claims.  After all it not only looks good but also helps keep the premiums down.  The fact is accidents can happen and that is what insurance is about!  However, if you have a Builder/GC with quite a few claims, they're constantly changing insurance carriers, they have limited policy coverages, etc., then you might be looking at a problem Builder/GC.

Checking out the Builder/GC's associations they are affiliated with.

Associations are all the same, they are there to serve the members and not necessarily the general public/consumers!  I won't get into the long discussion about them as this is a subject all in its own.  However, they can provide some usefull information, with the most important being a way to check the truthfullness of the Builder/GC.  Check out their membership status to see if they are even a member.  Read the associations membership requirements, paying particular attention to any Code of Ethics (COE) if one exists, and see if the Builder/GC is fulfilling them and abiding by the COE.  Contact the association and see if there are any complaints against the Builder/GC.   Don't hold your breath expecting a lot of in depth information from the association though.  Associations exist because of dues paying members and many will not provide in depth information on members for fear of members quitting, or worse yet being dragged into court for harming a members reputation.  What is valuable here is if the Builder/GC is making true claims about the association they belong to. Also if the association has various membership rankings then read what is required to obtain them and make sure those requirements are of value to your project.  If not then these "Master so and so" ratings are nothing but fluff used for marketing and advertising to unsuspecting consumers.

Checking the previous six projects the Builder/GC gave you information on.

One of the suggested questions, on the seperaste question sheet, was to ask for the Builder/GC last six large projects, what role they assumed (i.e. Builder/GC, subcontractor, etc.), and if they performed any of the work themselves.  With this information we will use the available resources to see what type of Builder/GC they are.  Before we go any further in the research I will mention that absent in the questions above are people references for prior projects.  References obtained directly from Builder/GC are, in my opinion, not very helpful.  After all think about it for a minute, no business person in their right mind is going to give you a reference for a client that was completely dissatisfied with their services. Usually I find that the references provided are also from clients that have been given an incentive to be a reference as well. For example, for the privelege of being a reference the Builder/GC might have given them a gift, free services, reduced price on their project, etc., in exchange for a good reference.  I've also been given false references that never even used services from that Builder/GC.  If after you finish this check and still want to use the services of Builder/GC then ask for references if you feel the need.  If you do then make sure you check them out fully.

When you check out these previous jobs the goal here is not necessarily to see how well they did on the job, although that is important, instead it is used to gather more information as to the honesty of the Builder/GC, and how they operate.  You have already checked out the Builder/GC to see what professional licenses they currently hold.  If the Builder/GC told you they performed the work themselves, and they do not have a proper license to perform the work then you have a red flag.  We want to ask for at least six last projects because at least one or two should be fairly large enough to give you a good idea of what to expect.  Also look at the start and end dates of these last six projects.  Were there large time gaps between the end date and start date of the next project?  This could indicate either the Builder/GC did not give you the last six projects and instead gave you the last six good or impressive projects. It could also indicate a struggling Builder/GC.  Keep this in mind when you are checking the remainder of the information.    

Next you want to check the building permit records for the job.  Many locations now have that information available online so check the city and county WEB sites to see if they do.  If it is not online then take a trip to the local building department to view this information. Review the city or county building and remodeling requirements and see what activities require building permits.  Then pull the permit records and look for the following items.


If the Builder/GC did give you contact names for these projects then by all means call them and speak to them.  Let the conversation free flow but be careful about telling them much about your project as you don't want to muddle the waters or turn the conversation to you and your project, as this is about them and their project.  There are really only two questions to ask and the first would be "How did you like Mr. Builder/GC's work performed for you?".  Let the person go on about anything they want and take a lot of notes with specific details that you might find very handy during later searches.  Near the end of the conversation as the second question "Did you encounter any issues with Mr. Builder/GC before, during or after the project?".  These are both open ended and general questions which will hopefully elicit a good deal of talk from the reference.  Remember, the more they talk, the more information you can gather about the Builder/GC.    

Checking experience claims for unlicensed trades.

As you can see there are many trades related to building that are not even licensed in Texas.  Checking these claims are not impossible but might not be easy.  The only real way to determine this is to obtain extensive information from the Builder/GC such as past union affiliations, along with union identification numbers, union contacts to verify the information, etc.  If the Builder/GC belonged to any organizations or associations that required training and certifications you can ask for those and the information to verify it.  If the Builder/GC listed prior employers they reportedly worked for you can ask for previous employment contacts and speak with them. The problem that you have with any of these methods will be the reluctance of other businesses or organizations to provide any current information they have.  Also, if the information is old enough they may no longer even have it, or have it readily accessible.  Unless you can easily obtain this information from the Builder/GC, then trying to validate the claims might not even be worth the time.  Under this condition I would not rely heavily on these past experience claims.

The calm before the storm!

You've done quite a bit already to check out your chosen Builder/GC.  If your choice has not already washed out then it is worth taking the next steps to learn a little more about your potential Builder/GC.  There are numerous sources on the internet you can use to search for information about specific companies and people.  Some of these will be listed here, but it all boils down to using the standard search engines available, i.e. Google, Yahoo, etc.  The remaining questions asked will not all be specifically discussed here.  Their purpose was to gather background information on your chosen Builder/GC for you to use while searching these various internet sites.  I will mention the site types during the folllowing descriptions but will not provide the links in the discussion.  Instead there will be a list of relavent links at the end of this article.    

General internet search information.

WEB based research is a hit and miss proposition when using the various search engines out there.  What you find can be influenced by the order of your search phrases and how much, or little, detail you add to the phrase.  The best method of searching is to try and use as little information in the search words or phrases and then drill down from there.  If you do not find a match to your search criteria then try different words or phrases that mean the same thing, and are applicable to what you are searching for.  It will take a little getting used to but you will get the hang of it.  

When running searches you might run into what appears to be small bits of insignificant information.  Make note of it anyhow as that might be the one bit of information needed to verify a larger piece of information found.  There are many times that I have used these apparently insignificant pieces of information to match a person to a Bulletin Board screen name, or an address, or other information. From there it lead me to other, more significant information regarding the person or company I was researching.

Searching for people on the internet.

Part of the questions dealt with various dates for the Builder/GC's current and previous business dealings, potentially residences, etc.  Using the various people search engines there is a great deal of information to be had.  By searching a person and matching their residence history you can not only tell if they are telling you the truth, but also use that information for other search efforts as well.  As an example, one Builder/GC I was checking into only provided information regarding their local history.  When I searched for them using the people search engines (see list at end of article) I was able to create a history of where else they lived and/or held a residence, what other businesses they previously owned and operated, as well as other pertinent information.  Further searching of those other areas I found out several major points.  The first important point was that person moved around a lot, they had new business names in all of those areas, and I did find negative related information in some of the other locations in businesses they were operating. Obviously they were immediately removed from my list of potential Builder/GC's.  After all, why would I want to do business with a very mobile person who appears to be running from the problems they created?

Part of the questions dealt with various dates for the Builder/GC's current and previous business dealings, potentially residences, etc.  Using the various people search engines there is a great deal of information to be had.  By searching a person and matching their residence history you can not only tell if they are telling you the truth, but also use that information for other search efforts as well.  As an example, one Builder/GC I was checking into only provided information regarding their local history.  When I searched for them using the people search engines (see list at end of article) I was able to create a history of where else they lived and/or held a residence, what other businesses they previously owned and operated, as well as other pertinent information.  Further searching of those other areas I found out several major points.  The first important point was that person moved around a lot, they had new business names in all of those areas, and I did find negative related information in some of the other locations in businesses they were operating. Obviously they were immediately removed from my list of potential Builder/GC's.  After all, why would I want to do business with a very mobile person who appears to be running from the problems they created?

You should be aware that the people search engine list I have given will only provide very rudimentary free information regarding the person whose name you are searching.  Unless they have an extremely unique name then you might very well find many of the same named people around the country, and even in the same city.  Depending on your search results you can be swamped with entries requiring you to narrowly define your search to the last known area, then using information from that to widen your search and correlate names to addresses, relatives, etc.  Also a person can be listed in various parts of the country if they have had other dealings there and not having lived there.  So you do need to take this into account and verify they did live there or do business there before you count them out.  I have yet had the need to pay for any of these services as the free information, along with other information search sources, has been more than enough to find the information I wanted.  Besides, most of this information comes from freely accessible sources if you know where to look for it.  

Another great source for finding people are the large number of social networking sites that exist today.  Sites such as LinkedIn, FaceBook, etc., can provide additional details and history information about people and are well worth searching through.  These types of sites can also provide information about the potential Builder/GC selection such as, previous residence history, work history, political views, social views, who and what type of people they personally associate with, etc., etc.  It is simply amazing the amount of information about themselves that people hand out to the world to view!              
  
One last note about searching for people whether through these people searches or the general internet search engines.  As you research you will find that many people will use knicknames or shortened versions of their names.  For example the real first name is Daniel but they list themselves as Dan, or Hank being another name used for Henry.  Also sometimes the name is spelled wrong at some point and might appear slightly different such as "Johnson" might appear as "Jonson".   If you can not find the persons legal name then use variations of the name.  Dishonest contractors might also use entirely different but similar names that are parts of their real name as shown in the "Johnson" example.  So if you run across a piece of important information under a similar name make a note of it as it might cross to something else you find later under their real full name.

Searching a business on the internet.

There are many companies out there with impressive names, corporate designations, etc., but what's behind that name?  Are they a one man operation, even though they use the words "We" "Us", etc.?  Did the owner leave one location and name just to start a new operation in the new area?  Was the company running properly and legally in any area that were working?  We are in an age were there is a great deal of exageration in company claims, and with the Internet it is easy to build a false image that can fool most people.  It is important to know about these companies, and if they are honestly representing themselves. There are various business search engines available, but most all require a fee.  It is better, and easier to just use the standard standard search engines available, as well as the general internet search techniques discussed above.  Many times your search will actually access the records from these "paid for" search functions anyhow.  The concept here is to search previous business names, locations, etc., in an attempt to find information either good or bad about the business.

The end result.

With these steps you have hopefully learned a great deal about your chosen builder/GC, or at least a sufficient amount to decide whether they are worth contracting for your project.  Through all of this research you must keep in mind that ultimately the choice of whether or not to use that builder/GC is yours.  You must be ready to live with your decisions and that means using vigilence to at least perform some research on the builde/GC.  If you have any questions regarding this article, or suggestions please feel free to contact me.

Resources

These are only some of the resources available to you.  Please take a moment and visit my links pages for additional resources that can be of help not only during the selection process, but also during the actual work being performed.

People search engine sites

Note:  Most of this data comes from the same general sources.  Some of these lookups might have more or less information than the other so it is good to run the person through all of them.  This is by far a complete list of sites and others are available.

Pipl (This is my number one site although I will use others as well in conjunction with this one)
US Search
Melissa Data (might also show business names and associated businesses, possible relatives)
People Lookup
Zabbasearch

Social Networking sites

LinkedIn
FaceBook
Flickr (sharing photos)
MeetUp
MySpace
Twitter