Your contractor can make or break a project. A great GC keeps you on budget and on schedule. A bad one can stall a job for months, leave you with liens on the property, and turn a profitable deal into a loss. Lenders know this, which is why the GC is part of our review on every construction loan.
Here is how to vet a contractor before you sign anything.
Check the basics
- License. Verify the license with your state licensing board. In South Carolina, residential builders and specialty contractors are licensed through the Department of Labor, Licensing and Regulation. Confirm the license is active and matches the company name on the bid.
- Insurance. Ask for a certificate of insurance showing general liability and workers' compensation. Ask to be named as an additional insured.
- Business history. How long has the company operated under its current name? Search for complaints, lawsuits, and liens.
Look at recent work
- Ask for addresses of three to five recent projects similar to yours in size and scope.
- Drive by, or better, walk through one if you can.
- Call past clients. Ask whether the job finished on time, on budget, and whether they would hire the contractor again.
- Ask who ran the job day to day. The owner who sold you the job may not be the person on site.
Compare bids the right way
Get at least three bids on the same scope of work. When you compare:
- Make sure each bid covers the same items. A low bid often leaves things out.
- Look for line-item detail, not a single lump sum.
- Be careful with a bid far below the others. It can mean the contractor missed something, or plans to make it up in change orders.
Get it in writing
A solid construction contract should include:
- Scope of work matching your approved budget
- Total price and what is excluded
- Schedule with a start date and completion date
- Payment schedule tied to completed milestones, not dates
- Change order process requiring written approval and pricing before extra work begins
- Lien waivers from the GC and major subcontractors with each payment
- Permits stating who pulls them and who pays
- Warranty terms on workmanship
Line up payments with your draws
Your GC's payment schedule should match your lender's draw schedule. If your contract says you owe the contractor after framing, your draw schedule should release funds after framing. When the two do not line up, you end up fronting cash you did not plan for.
Collect lien waivers with every payment. An unpaid subcontractor can file a lien on your property, and a lien can hold up your sale or refinance.
Red flags
- Asking for a large deposit before any work starts
- Asking for cash payments only
- No license, or a license under a different name
- Unwilling to provide references or a written contract
- Pressure to sign quickly
- A history of liens or unresolved complaints
One more check: ask the contractor how many jobs they are running right now. A good GC who is stretched across too many projects can cause the same delays as a bad one. If your job will not get steady attention, find out before you sign.
How we look at your GC
On construction loans, we approve your contractor as part of underwriting. We look for an active license where your state requires one, a current insurance certificate, and references or photos from past projects. Because our team includes builders, we can often spot a light bid or an unrealistic schedule before it becomes your problem.
Have a contractor lined up?
Send us the bid along with your deal. We will review it alongside the loan and flag anything that looks off.