1. Know what you want. As the client, you are the one driving the process. Before speaking with contractors, spend time thinking about your goals for the project -- what it might look like, the amenities you want, and so on. If you don't know how to translate your goals into specific features or products, hire a design consultant or a design-build firm that can offer that service.
2. Get bids from several contractors. Three bids is considered the minimum number, but a half dozen will give you a clearer picture of how these companies stack up against each other. Not only will you get more perspective on appropriate costs, but also you'll get an idea of the caliber of work that each contractor will provide. For example, one contractor may offer a bargain rate and marginal work; another's high bid could indicate quality.
3. Do background checks. Even if a friend or relative has recommended a contractor that he or she has used before, you should establish some minimum credentials. Get the full company name and address, and make sure that the firm has a current state license and adequate insurance coverage. (Typically, this means at least a million dollars in liability and worker's compensation coverage.) Get license and policy numbers, then verify that they are current. Determine whether any formal complaints or legal actions have occurred in the past or are pending.
4. Investigate a contractor's work history and work habits. Some contractors are specialists and some are generalists, so make sure their abilities are appropriate to your project. Take time to see their work firsthand, and look for three things: some similarity to your project, quality materials and workmanship, and consistent client satisfaction. Also, track small indicators that signal professionalism or a lack thereof. Are your phone calls returned in a timely manner? Are appointments and meeting times kept? Do company vehicles and/or dress code reflect pride and cleanliness? Carelessness in these small matters does not bode well for the quality of work.
5. Set boundaries for the job site. Let the company know you expect routine precautions, such as employee background checks for anyone who will have access to your home. Also, establish some ground rules about parking, bathroom use, smoking, and other issues that might concern you.
6. Know what you'll be paying for. Everyone loves a free estimate, but if the project cost will exceed several thousand dollars, contractors likely will prepare (and charge for) a "scope of work proposal." Typically, this proposal will break down the job budget into line-item costs for labor, materials, fees, and so on, or at least will offer specifics about the tasks the contractor will perform (demolition, installation, cleanup) and what products will be used. The proposal fee often is paid up front and applied toward the project cost if the bid is accepted. Contractors will often give you a fixed bid, but some work on a "cost plus" basis, charging you for materials, time/labor, and an administrative or overhead fee. This is sometimes a legitimate alternative, but it should have a cap or some provision to contain cost overruns.
7. Have a strategy for how you will resolve differences. Any contractor you hire will become part of your life for at least the duration of the project. Make sure you pick someone with whom you can communicate, and trust your gut if first impressions leave you feeling uneasy. Reputable professionals will insist on clear written agreements in order to protect both parties. During initial meetings, ask how unexpected issues or differences might be handled. This can include change orders (these should always be in writing, with cost issues directly noted) or more serious disputes, such as unintended damage or a failure to meet legal or reasonable standards.
8. Be aware of contract details. A contract should include start and completion dates, information on applicable building permits and fees (typically handled by the contractor, but legally your responsibility), a description of what products and services are to be provided by the contractor, payment terms, subcontractor issues (such as license and insurance verification and warranty of workmanship), and the consequences of default by either party. Default can include a contractor's failure to pay subcontractors; the contract should exclude you from liability in the event that occurs.