I have never worked with a GC. How do they operate? If you have a house that is in need of a complete rehab and they give you a quote are they obligated to stick by their contract price? What happens if something unforseen comes up? I assume it is the responsibility of the homeowner but am not sure. Typically what percentage do you have to pay upfront (if any)? I understand it is important to check references, there are many dishonest people out there. Does anyone have any other suggestions on what to look out for or comments to make?
Heather if you need a contractor and you have never used one, you are at a real disadvantage as a RE investor. You need these pros to work with you as part of your team. So you are right to reach out to others to find your contracting team members.
I would start by asking the realtors, neighbors and family members you know to recommend someone.
I also especially recommend NARI and RAR as sources for qualified remodeling contractors. You may need anyone from a handy man to a full fledged design/build contractor.
All of these pros have professional contracts, mark up rates, etc. Expect to get what you pay for. Treat your team member well and they will take care of you.
Full disclosure I am an owner in a design build firm in PA and a member of RAR.
They will be responsible for the Scope of Work on which you both agree. If they need to hire trade contractors to meet their end of the deal they will do so.
As to unforseen conditions... this depends on the contract (if any) and what the conditions are. For the most part they will be your responsibility. This usually means that you will work with the same GC but it will cost you more to deal with the unforseen conditions.
Deposits... This also depends on the contract and the size of the contract. When a contract gets to the $20k region it is common to have draws (also known as progress payments). Below that there are normally two payments a deposit and a final payment - usually 50-50. Of course everything is negotiable and there really is no magic number or magic rules - the above is from experience.
I appreciate your reply. That's pretty much what I expected, I just wanted to be sure my assumptions were accurate. I can't imagine operating without a contract, is that a common practice? It seems as though this would be your only protection.
There is a dollar amount, below which it is hardly worth the effort to do a contract. This amount would vary from contractor to contractor. For example, would you do a contract to have your lawn mowed by the neighborhood kid for $20? Would you do one to have a front door replaced for $600?
Our limit is $2,500. Above which we do a contract and below which we do a signed proposal. The proposal is a 1 page document that identifies the scope of work, has a few short legal clauses and requires a signature from the owner (we call it the mini-contract).
Contract knowledge and terminologies are critical with GC's. You also want to make sure they are licensed, bonded, and insured and that they have been in biz for some time. Look up any complaints are negative filings against the contractor as well.
There are several different ways that you can set up how a contractor gets paid, some more preferable than others IMO. It can be a set fee base or cost plus to name two. I am not a huge fan of cost plus as the contractor has no incentives to keep the costs down, however, the possitive being that they have an incentive to not cut corners.
I would also verify licensing requirements with the city, county, or whoever controls the property. And, then verify the contractor and all their subs meet those requirements and have current licenses.
We have been in business for 11 years as an electrical contractor in Central PA. I find it odd that in that entire time only one homeowner or REI has asked for proof of license and insurance.
It should be noted for all reading this thread that the above website or any like it IS WORTHLESS until after 1 Jul 09.
As of this writing, PA DOES NOT, and has not, had statewide licensing of any contractor. That law has changed and goes into effect on 1 Jul 09. Contractors MAY register now, but the registration is meaningless (not needed) until this date.
PA has NOT set up the registration process yet for contractors. They have only posted the new rules that will go into effect for the July 1st 2009 date.
Here is the site that outlines all the new rules and laws.
http://www.pacontractorslicense.com