Decatur, GA · Member since 2015 · 419 posts · 52 votes
Today is my last day of due diligence on my first flip property. My real estate agent referred me to an experienced GC. I like him and am confident he is reliable enough and would do good work, but I found out today that he is not licensed (previous license expired) or insured. Also, some of his subcontractors are not residing here legally. Is this an obvious no go on this contractor? If so, do others here (I'm in Atlanta) have good GC's they can recommend? I am also wondering if I could have a lawyer draft a waiver to eliminate any of my liability for accidents and what not on the job.
Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
10y
If you're hiring work that needs a license, get a licensed contractor. Your liability is enormous and no amount of waiver will waive away your responsibility for accidents or other problems... not to mention that without a license, you won't be getting permits... which exposes you to a whole lot of potential mess.
Shame on your agent for recommending an unlicensed contractor. I bet the agent would be livid if someone recommended an unlicensed individual practicing real estate.
... and on that note, if your quotes to date have only come from contractors that the agent recommended, you need to find a way to extend your diligence and get third party opinions. There's a number of very shady agent/wholesalers in Atlanta who have sucker punched more than one new investor by selling them property predicated on repair estimates coming from contractors that the agent controls.
Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
10y
If you're hiring work that needs a license, get a licensed contractor. Your liability is enormous and no amount of waiver will waive away your responsibility for accidents or other problems... not to mention that without a license, you won't be getting permits... which exposes you to a whole lot of potential mess.
Shame on your agent for recommending an unlicensed contractor. I bet the agent would be livid if someone recommended an unlicensed individual practicing real estate.
... and on that note, if your quotes to date have only come from contractors that the agent recommended, you need to find a way to extend your diligence and get third party opinions. There's a number of very shady agent/wholesalers in Atlanta who have sucker punched more than one new investor by selling them property predicated on repair estimates coming from contractors that the agent controls.
Flipper/Rehabber · Atlanta, GA · Member since 2015 · 35 posts · 18 votes
10y
@Nick BrubakerFrom my understanding, the only difference between a subcontractor and a GC is that a GC is licensed to build ground up. Licenses are required when you need a electrician, plumber or HVAC work to pass inspection. Banks and other lenders may require a GC. But if your using your own cash, there are plenty of contractors/subcontractors out there that gets the job done and stands behind good work that can renovate properties inside and out. However, if you do decide to go this route, I would strongly suggest to only hire contractors who are insured and bonded
Decatur, GA · Member since 2015 · 419 posts · 52 votes
10y
Thank you @Hugh Ayles and @Nathaniel Carswell. This is good advice. Nathaniel, I don't suppose you know any good GC's that you are willing to recommend?
Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
10y
@Nathaniel Carswell- Your understanding is incomplete, good sir. The state requires a licensed GC any time work is being performed in excess of $2500. A GC license is also required to get a building permit (Not a trade permit, building permit).
Also, anecdotally - I've never seen, met, or heard of a self-proclaimed GC who has insurance but no license.
Real Estate Broker · Windsor, CT · Member since 2015 · 1k+ posts · 268 votes
10y
You need to find a licensed GC. Depending on your loan it will require that. If you are buying cash I would still suggest you find a licensed GC and see if they have a warranty on the work that they do as well.
Flipper/Rehabber · Atlanta, GA · Member since 2015 · 35 posts · 18 votes
10y
@Aaron McGinnisI started renovating homes at the age of 14 yrs old with a friend of the family. Guess I violated labor laws as well? When 21 yrs old, I started handling my own projects. I've installed flooring for clients that cost well over $2,500. In December 2015, I completed a vinyl siding job that cost the client $4,700. I could go on and on but fact is not all investors are turning to GC every time they need work done outside of electrical, plumbing, and HVAC. Even with these three services, a General Contractor isn't needed if you have a licensed, electrician, plummer, and HVAC technician doing the job.
Also I'm very familiar with State Law Requirements and yes you are correct. Work exceeding $2,500 does require a GC. But many of us know cheaper alternate ways to get the job done with the same results other then hiring a GC who's only going to hire others to paint walls in a house, put floors down, then combine the "two" jobs into "one" invoice exceeding $2,500.
Investor · Atlanta, GA · Member since 2014 · 389 posts · 250 votes
10y
You sure can get around it, and if nothing goes wrong, you're golden. But if you know enough already (and are concerned about it) to even consider having an attorney write you a "not my fault" waiver, you know too much to even consider going ahead with that plan.
Contractor · Phoenix, AZ · Member since 2013 · 42 posts · 25 votes
10y
I don't know about Georgia but here in Arizona it is a class 6 felony to contract without a license for an amount of work over $600. Hiring a licensed, bonded, and insured contractor is paramount to protecting yourself against both short term and long term liability. Short term: someone is seriously hurt, a fire, structural damage caused by unlicensed "contractor, etc...Long term: roof leak, interior flooding, electrical fire, problems arising from improper construction just to name a few. No amount of short term savings is worth the long term risk.
Contractor · Harrisburg , PA · Member since 2016 · 2 posts · 1 vote
10y
The contractor having a license/ insurance does not eliminate the potential of lawsuit against you for whatever reason the license is simply something the state likes to issue that can sometimes require a test of knowledge but not always the insurance is for incase you sue him and if your talking workman's comp that's whole other story most small contractors have their employee's on a 1099 so they don't have to carry comp but once
again that only helps you if they damage your property
If you see professional work and work is being done in a timely manner I wouldn't upset that
Decatur, GA · Member since 2015 · 419 posts · 52 votes
10y
Thank you @Anna Watkins, @M.L. Childress, @Mitch VanDeveer, and @Melissa Gittens. I guess it's clear that I will have to find a licensed and insured GC. Unfortunately that's a little easier said than done. My understanding is the best way is through referrals, so I would be very interested connecting with any contractors others here have had positive experiences with.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
10y
What are the pre qualification to obtain a GC license in your state?
In PA it requires one to fill out a form and provide the $50 application fee. Quite disheartening when I found that out.
I would absolutely require the GC to have liability and workmans comp insurance.
Investor · Marietta, GA · Member since 2016 · 7 posts · 4 votes
10y
Following this conversation. First timer here also, and I've run into the same question. Would love to be a part of the conversation for recommended GCs.
What are the pre qualification to obtain a GC license in your state?
In PA it requires one to fill out a form and provide the $50 application fee. Quite disheartening when I found that out.
Why is that disheartening? What do you see in the efficiency of government that makes you convinced that government is qualified to judge someone's qualifications to be a GC?
We have no GC licensing in Texas. We also have the best economy in the nation. Every week, I interview guys coming in from California, Illinois, NJ, NY, Michigan....all those "big government" states. Many of them had GC licenses that they spent hundreds of hours of study to obtain...and aren't worth a bucket of warm spit when we put 'em on a job site.
A good contractor should have reviews on Angie's List, Yelp, or other places. Or they should be able to walk you through current projects they're working to let you see their quality. They should definitely have liability insurance. But worker's comp? Do you know what that costs? Do you actually want to make money on these properties, or just spend it all paying your GC?
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
10y
Personally I don't care at all if someone is licensed. A contractors license is no indication that they know what they are doing. Many excellent workers do not have a license.
That said, others may very well care whether you use licensed contractors. For example in my area, agents are asking if permits were pulled on renovations. Your insurance company may not allow a claim if it was caused by not licensed workers. Even if using unlicensed workers you still need to follow laws like workers compensation.
Your state may require licensed workers, In MD it is my understanding that it illegal to work without a license but it is not illegal to hire them. (HVAC, Electricians, Plumbers are exceptions however, these should be licensed)
I guess my bottom line is do not assume because someone has a license that they are competent, timely Cleanly, or efficient.
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
10y
@Nathaniel Carswell Pretty much you have violated child labor laws, well, maybe not you, but your "friend of the family". Accepting jobs that is more than 2500 (assuming it is true, based on your state law), then yes. We all know the things that goes around within the construction industry, however, the OP is looking for solid and legal advice, not a work around. In CA, when you mess with more than 2 trades, a GC license is needed, and any work more than 600 needs a license, now that does not stop anyone from doing the things they do, but if you are the investor, don't expect much recourse when things hits the fan, it is not a question of IF, it is a question of WHEN. Getting an unlicensed contractor can be cheap, for a very good reason, they don't normally pay all the expenses a licensed contractor does, taxes, insurance, overhead, etc.
@M.L. ChildressSo not true. If a contractor has worker's comp, if someone dies while doing a work, worker's comp covers it, it does not cover any damage on your property, the contractor bond protect you from workmanship defect and non-payment to subs/workers/suppliers, CGL protects you from damages. That is why checking for "licensed and insured" is not really enough, they can still be "insured" if they have a 20k CGL coverage or "bonded" with 15k minimum bond that the state may require, so what's the use of a CGL if they have workers/employees? None.
San Francisco, CA · Member since 2015 · 786 posts · 717 votes
10y
The laws probably vary by state. If they are not licensed and bonded, you have no protection if they walk away with your money without work performed. Investors are playing Russian roulette if they don't hire licensed and bonded contractors.
That being said, being license and bonded contractors, does not mean they are any good. In a hot construction market like we have today, it is difficult for contractors to find qualified skilled labor. The labor rates are fiercely competitive and it drives up wages. This makes it difficult for rehabbers as the wage increases pass on to the rehabbers.
Contractors are a major problem in the Seattle area. We simply could not find enough good contractors in Seattle and had to be a GC for ourself as the only way to handle 25+ projects at a time. I don't think it is as difficult to find good contractors in many other areas of the country and so I am describing my own market here.
Their are three class of contractors at least in my area in Seattle.
1) Cheap ones that hire cheap labor (mostly undocumented illegal labor) at well below market rates. Don't be fooled when they say that their workers have valid ITIN cards; that does not mean they are legal to work in the United States. Problem with the cheap contractors is that it is a game of Russian Roulette. Quality might be passable 2 out of 3 times, but if you keep playing the game it will not end well.
Most rehabbers hire the cheap contractors and then they complain that the contractors did such poor quality.
2) Second group are rip-off contractors that charge high prices but do low quality work.
3) Third group are high-quality contractors but they tend to charge higher prices (that may be way over the budget). The problem with good contractors is that they maybe good for one project but may not have the resources to handle 4 to 5 projects effectively. In a labor market with short supply of skilled workers, it maybe impossible for a high-quality contractor to get enough skilled labor. The second problem is that they is less supply than demand for these high-quality contractors. The good contractors may simply feel that they have much more profitable opportunities and less hassle than rehabbers.
If you have contractor problems, join the club. If you think becoming your contractor is easy, I guarantee that it is 10 times more difficult than you could imagine. There simply maybe no easy solution to this contractor problem particularly if you do 5+ projects at a time.
I have 39 employees in my construction company and we have half the labor force needed for just my own projects. It is an ongoing battle to find enough skilled workers who work fast and do good quality.
Decatur, GA · Member since 2015 · 419 posts · 52 votes
10y
What's the difference between being insured and bonded? Is that the same thing? To be clear what does that cover? Does that cover worker compensation issues?
Decatur, GA · Member since 2015 · 419 posts · 52 votes
10y
Thank you @Michael Hayworthand @Ned Carey. So while you both are saying a license may not be necessary, is it still critical that the contractor be insured?