9 Red Flags When Hiring a Contractor in 2026 (A Licensed GC's Warning List)

How Do I Know If a Contractor Is Legitimate Before I Hire Them?

Go to cslb.ca.gov right now and look up their license. Takes 30 seconds. If their license is expired, suspended, or does not exist, stop the conversation there.

In California, every general contractor working on projects over $500 must hold a valid CSLB license. That is not a suggestion. That is the law. According to CSLB complaint data, unlicensed contractor complaints account for a significant portion of the thousands of cases the board investigates annually, and homeowners in those cases routinely lose $20,000 to $80,000 before they realize what happened.

Beyond the license itself, here is what to check:

• Active status: The license must show "Active" - not "Suspended" or "Expired"
• Classification: A Class B license covers general building. If they are doing specialized work (electrical, plumbing, HVAC), they need the right C-class license.
• Bond status: Licensed contractors in California must carry a $25,000 contractor bond. Verify it is current.
• Workers compensation: If they have employees and claim exemption, ask them to prove it in writing.

As a contractor, I can tell you the most common thing homeowners say after getting burned is: "He seemed so professional." Seeming professional is not the same as being licensed and insured.

What Red Flags Should I Look For in a Contractor's Bid?

Three things kill homeowners in bids: no line-item detail, a price that seems too good, and a refusal to put things in writing before you sign.

Get three bids minimum. Not two, not one. Three. And if the lowest bid is 30% or more below the other two, that is not a deal. That is a contractor who will load you up with change orders the moment demo starts, or who will cut corners you will not discover until your inspector fails the job.

Based on typical project data from Bay Area contractors, a kitchen remodel in 2026 runs between $85,000 and $175,000 depending on scope and finishes. A bid at $45,000 for the same scope is not a bargain. It is a setup.

Here is what a red-flag bid looks like versus a legitimate one:

Allowances are where homeowners get crushed. A contractor might bid $8,000 in allowances for cabinets, tile, and fixtures combined. When you actually pick materials, those allowances balloon to $22,000. That difference becomes a change order, and suddenly your "budget" project is $14,000 over before framing even starts.

Ask every contractor: what is specifically excluded from this bid? If they cannot give you a written answer, walk away.

What Are the Warning Signs in a Contractor's Contract?

A contract that protects the contractor more than it protects you is a red flag. Most homeowners do not read the contract carefully enough to know the difference.

In my experience building homes across Silicon Valley since 2017, I have seen homeowners sign contracts that give contractors 90-day windows to start work, unlimited rights to substitute materials, and zero recourse on delays. Do not be that homeowner.

Here are the contract red flags that should make you pause or walk away:

• No draw schedule: Payments should be tied to specific milestones, not dates or requests. If there is no draw schedule, you have no leverage once money changes hands. Read about how draw schedules protect homeowners at this complete guide to draw schedules.
• Large upfront deposit: California law caps the initial deposit at 10% of the contract price or $1,000, whichever is less, for home improvement contracts. Any contractor asking for $5,000, $10,000, or more upfront before work begins is either uninformed or trying to take your money and run.
• No completion date: "Work will be completed in a reasonable timeframe" is not a completion date. Get a specific date with penalties or remedies for delays.
• No change order clause: Every contract must spell out how changes are priced, approved, and documented. Verbal change orders are not enforceable. Any contractor who says "we will figure it out as we go" is telling you the price will change after you cannot back out.
• Arbitration only: Some contracts strip your right to sue in court. Understand what dispute resolution looks like before you sign.

As a contractor, I can tell you that a well-written contract protects both sides. If a contractor pushes back on adding completion dates or change order language, that tells you exactly what kind of project experience you are in for.

What Red Flags Should I Watch For Once the Project Is Underway?

Most homeowners assume the hard part is over once the contract is signed. It is not. The project phase is where bad contractors do the most damage.

Watch for these warning signs after work begins:

• Subcontractors you have never heard of: A general contractor coordinates work through subcontractors. That is normal. But if your GC is bringing in subs you have never been introduced to and cannot verify, those subs are working without your knowledge of their licensing or insurance status.
• Work happening without permits: If demo started and no permit has been pulled, that is a problem. Unpermitted work can result in stop-work orders, fines, required demolition of completed work, and major issues when you sell your home. Ask to see the permit card posted at the job site.
• Requests for payment ahead of schedule: If your contractor asks for the next draw before the milestone that triggers it is complete, say no. The draw schedule exists for a reason. Platforms like Opsite let contractors tie invoices directly to completed milestones and inspection sign-offs, so homeowners can see exactly what triggered each payment request - if your contractor cannot show you that logic, that is a red flag.
• Going silent: If your GC takes 48 hours or more to return a call or text, that is not a communication style. That is a warning sign. Contractors who are overextended or in financial trouble go quiet before they disappear entirely.
• Unexpected material substitutions: You selected specific tile, cabinets, or fixtures. If something different shows up on site without a conversation, ask why immediately. Substitutions can signal the contractor is using materials from another job or cutting costs at your expense.

Based on 2026 construction cost data, change orders on a typical remodel add 15% to 25% to the original contract price when the project is managed informally. On a $120,000 kitchen remodel, that is $18,000 to $30,000 in additions. Good project management, clear contracts, and real-time documentation cut that number significantly.

What Happens If I Hire an Unlicensed Contractor in California?

If your contractor is unlicensed and something goes wrong, you have almost no legal recourse. That is the honest answer.

According to CSLB complaint data, homeowners who hire unlicensed contractors cannot file a complaint with the CSLB, cannot make a claim against a contractor bond (because there is none), and often find that their homeowner's insurance will not cover damage caused by unlicensed work. You are left with civil court, which is expensive and slow.

Here is a side-by-side of what you get with a licensed contractor versus an unlicensed one:

From working with homeowners on projects ranging from $50K to $2M+, I have seen what happens when unlicensed work fails inspection or causes property damage. The homeowner ends up paying twice: once for the original work, and again to have a licensed contractor tear it out and redo it to code. That is not a hypothetical. That is what happens on at least a few projects in every market every year.

Go to cslb.ca.gov. Look them up. It takes less time than reading this paragraph.

How Do I Protect Myself Before Signing Any Construction Contract?

Five things. Do all five before you hand over a single dollar.

1. Verify the license. cslb.ca.gov. Active status, correct classification, bond current. No exceptions.

2. Get three bids. Not to find the cheapest. To understand what the job actually costs and whether your contractor's scope matches the others. For more on understanding remodel costs, see the guide to how much a kitchen remodel costs in 2026.

3. Demand a written draw schedule. Every payment milestone defined. Every trigger for each payment spelled out. If they refuse, find another contractor.

4. Check references - but do it right. Do not just call the references they give you. Ask for the addresses of three completed projects and drive by them. Ask neighbors if they remember the crew. Look up the address in your county's permit records to see if permits were pulled and finaled.

5. Read the contract before signing. All of it. If there is language you do not understand, ask your contractor to explain it. If they cannot or will not, consult with someone who can. The Opsite FAQ covers a lot of common homeowner questions about contracts and project management - worth a read before you sign anything.

As a licensed GC who has completed hundreds of remodels, I can tell you most homeowners who get burned skipped at least one of these five steps. Usually it is the contract review. It feels like overkill until the project goes sideways and you realize you have no written basis to stand on.

The best thing you can do is treat hiring a contractor the way you would treat any major financial decision. Because that is exactly what it is.

Frequently Asked Questions

How much can a contractor legally ask for as a deposit in California?

For home improvement contracts in California, the law caps the initial deposit at 10% of the total contract price or $1,000 - whichever is less. Any contractor demanding $5,000 or more before work begins is violating California Business and Professions Code Section 7159. Report it to the CSLB if it happens.

How do I check if a contractor is licensed in California?

Go to cslb.ca.gov and use the license lookup tool. Enter the contractor's name or license number. You will see their license status (Active, Suspended, Expired), classification, bond status, and any disciplinary history. This takes about 30 seconds and should be done before you have any serious conversation about hiring them.

What is a lien waiver and why does it matter?

A lien waiver is a document that releases a subcontractor's or supplier's right to file a mechanic's lien against your property. If your general contractor does not pay their subs or suppliers, those parties can put a lien on your home even if you paid your GC in full. Always request lien waivers from major subs before making draw payments to your general contractor.

Is it OK to pay a contractor in cash?

Paying in cash is not illegal, but it removes your paper trail. Always pay by check or bank transfer so you have a record of every payment. If a contractor insists on cash only, that is a significant red flag - it often means they are not reporting income, not paying subs properly, or both.

What should I do if my contractor abandons the project?

Document everything immediately: photograph the current state of the work, preserve all contracts and payment records, and send a written notice via certified mail. File a complaint with the CSLB at cslb.ca.gov. The CSLB can investigate and potentially recover funds through the Contractors State License Board Recovery Fund, which covers up to $12,500 for licensed contractor violations.

How many bids should I get for a remodel?

Three is the minimum. Two bids do not give you enough data to spot an outlier. Three let you understand the real market rate for your project scope. If the lowest bid is 30% or more below the middle bid, do not take it. Ask the low bidder to walk you through their scope line by line - usually you will find they are missing major items or planning substitutions you did not agree to.

Do I need permits for my remodel?

Almost certainly yes, for anything structural, electrical, plumbing, or HVAC. In California, work without required permits is considered unpermitted construction. It can trigger stop-work orders, require demolition of completed work, and create serious problems when you sell the home. Any contractor who suggests skipping permits to save time or money is not protecting your interests.

What is the difference between a fixed-price and cost-plus contract?

A fixed-price contract sets a total price for a defined scope of work. A cost-plus contract charges you the actual cost of labor and materials plus a contractor markup (typically 15%-25%). Fixed-price contracts protect you from cost overruns but can lead to lower-quality materials if the contractor is squeezing margins. Cost-plus contracts give you full transparency but require you to trust your contractor's cost reporting. For most homeowners, a fixed-price contract with a detailed scope and a 15% contingency budget is the safer structure.