I recently encountered someone who wanted to do a remodel, but realized it costs more money than they thought. My suggestion at this point, is, to either (a) save up another year or so to get it done the right and best way, (b) do what absolutely needs to be done (if there's a leak or something that needs to be fixed immediately), or (c) lower the scope of work. Sometimes, we get impatient and want what we want now. This person decided to let me know they will be going the unlicensed contractor route to save money and get everything done faster.
I had to respectfully decline the full work at this point. I agreed to help with the material selections, but will be unable to fulfill the project management side. Why? A few reasons. The major reason is it is a huge, I mean HUGE liability for the homeowner. The second reason is the quality is not guaranteed, and no one but the homeowner is responsible for that. The third is, if I allow the unlicensed activity under my supervision, I will be the liable one.
There is a reason why licensed, bonded, and insured contractors are way more expensive than unlicensed contractors. Here are the reasons:
Hiring a Licensed Contractor Reason #1:
One of the first things to look for is a licensed contractor. A contractor who gets their license proves that they have met certain industry standards in the home owner’s area. If the work does not meet up to code regulations, and the home owner is caught by the city, the home owner is responsible for all costs. If this happens, an unlicensed contractor is completely off the hook. You, as the home owner get to deal with the city, pay extra fines, and figure out how to fix the issue. If you hired a licensed professional, you would call them up, give them the information, and it is their obligation to fix their mistake. If you are in California, you can look up the contractor to see if they are licensed at the Contractor's State License Board http://cslb.ca.gov
Hiring a Licensed Contractor Reason #2:
When hiring a licensed contractor, they will most likely have bonds attached to them. This is important because bonding is a guarantee that if the contractor does not perform the contracted work, the bond will cover the loss. This means you as the home owner will not be at a full loss financially.
Hiring a Licensed Contractor Reason #3:
Insurance is the third reason to invest in hiring a professional contractor. Contractors hold liability and workers compensation insurance. Liability insurance protects the home owner in the event the contractor damages the home–for example- they forgot to turn the water off before uninstalling a toilet, and we all know what happens there, destroying the flooring, sub-flooring and other materials. Homeowners insurance most likely does not cover this unless the home owner has in-home employee coverage.
Workers compensation protects the home owner in the event an employee gets hurt on the job on the home owner’s property. Homeowners insurance could potentially cover it after the home owner pays their deductible, but, that depends on how bad the injury is. Then, the claim can result in an increase in the home owner’s rate which could make it more difficult to get insured in the future.
Homeowner’s Insurance could also potentially be voided if a claim happens and the insurance company knows that the claim was from an unlicensed, uninsured, and un-bonded contractor.
This is the reason licensed contractors will have to charge more. They cover these liability costs to protect themselves, their employees, and the home owner. Cutting these costs have the potentiality of the home owner to get sued, lose their homeowner’s insurance with the risk of being too high of a liability to get homeowner's insurance again, and have low quality work done.
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