12 Red Flags When Hiring a Contractor in 2026 (A Licensed GC Tells All)

What Are the Biggest Red Flags When Hiring a Contractor?

The biggest red flags are no verifiable physical address, demanding more than 10% down in cash, refusing to pull permits, and providing a CSLB license number that does not check out. Any one of these should stop you cold.

I have been a licensed general contractor in California since 2017 (CSLB #1103938). In that time, I have seen homeowners lose anywhere from $15,000 to $400,000 to contractors who showed exactly these signs before the job started. The warning signs are almost always visible before you sign anything.

Here are the 12 red flags I tell every homeowner to watch for:

1. No physical business address - only a cell number and a Gmail account
2. Cannot provide a CSLB license number or the number does not match at cslb.ca.gov
3. Demands more than 10% or $1,000 (whichever is less) as a deposit - California law caps contractor deposits at this amount
4. Asks for payment in cash only, especially with a "discount" attached
5. Refuses to pull permits or says permits are not necessary for work that clearly requires them
6. Cannot provide a Certificate of Insurance showing active GL and workers' comp coverage
7. Gives you a bid with no line-item breakdown - just one lump sum
8. Bid is 25% or more below the other bids you received
9. Pressures you to sign same-day or claims the price expires tomorrow
10. Has no written contract or offers a contract shorter than one page
11. No references from the last 12 months or gives references who cannot be reached
12. Takes 48+ hours to respond to basic questions before the job even starts

Any single one of these is worth walking away over. Multiple red flags? Run.

How Do I Know If a Contractor's Bid Is Too Low?

If one bid comes in 25-30% below the others, that is not a deal. That is a contractor who either missed major scope items, plans to substitute cheap materials, or will hit you with change orders once they have your money and a hole in your wall.

As a contractor, I can tell you that the business math does not work any other way. Labor costs, materials, insurance, permits, and overhead are what they are. When someone prices a job at $80,000 and two other qualified contractors bid $115,000 and $122,000, the low bidder is not more efficient. They are either desperate for work, uninsured, planning to use unlicensed day laborers, or all three.

Get three bids minimum. Not two, not one. Three. And compare them line by line, not just the bottom number.

Based on 2026 construction cost data, a mid-range kitchen remodel in the Bay Area runs $75,000 to $150,000. A bathroom renovation runs $25,000 to $65,000. If someone quotes you $30,000 for a full kitchen remodel, they are not giving you a deal. They are setting you up. For a deeper breakdown of what remodels actually cost, see our kitchen remodel cost guide.

How Do I Verify a Contractor's License and Why Does It Matter?

Go to cslb.ca.gov right now and type in their license number. It takes 30 seconds. You will see whether the license is active, what classification they hold, whether their bond is current, and whether any complaints or disciplinary actions have been filed against them.

According to CSLB complaint data, unlicensed contractor complaints cost California homeowners tens of millions of dollars annually. An unlicensed contractor cannot legally pull permits in California. If they do unpermitted work and something goes wrong - a fire, a flood, a structural failure - your homeowner's insurance may deny the claim entirely.

Here is what to check at cslb.ca.gov:

• License status: Must say "Active" - not "Expired," "Suspended," or "Revoked"
• Classification: A "B" (General Building) license covers most remodels. Specialty trades (plumbing, electrical, HVAC) need their own "C" classifications
• Bond: California requires contractors to carry a $25,000 contractor bond - verify it shows as current
• Workers' Compensation: If they have employees, they need active WC coverage - the CSLB record will show this
• Disciplinary Actions: One complaint can be noise. Three or more in the last five years is a pattern

In my experience building homes across Silicon Valley since 2017, I can count on one hand the number of times a homeowner had a bad experience with a fully licensed, bonded, and insured contractor. The horror stories almost always involve someone who skipped this 30-second check.

Also verify their general liability insurance. Ask for a Certificate of Insurance (COI) naming you as an additional insured on the project. Call the insurance company directly - the number is on the certificate - and confirm the policy is active. A $1 million per-occurrence GL policy is the minimum I would accept.

What Contract Red Flags Should Every Homeowner Watch For Before Signing?

Any contract that lacks a detailed scope of work, a draw schedule tied to construction milestones, and a lien waiver requirement is a contract that protects the contractor - not you. Do not sign it until those three things are in there.

As a contractor, I can tell you what a bad contract looks like from the inside: it is designed to give the contractor maximum flexibility and give the homeowner maximum risk. Here is a direct comparison:

The draw schedule is particularly important. A properly structured draw schedule ties your payments to work that has actually been completed - not to calendar dates or contractor cash needs. Paying 50% up front before work starts is how homeowners fund contractors who disappear. To understand how a proper draw schedule works, read our guide on what a draw schedule is and how it protects you.

Lien waivers matter just as much. From working with homeowners on projects ranging from $50K to $2M+, I have seen people pay their GC in full, only to get a mechanics lien from a subcontractor or supplier the GC never paid. A conditional lien waiver with each draw is the only way to protect yourself from that scenario.

How Do I Spot a Contractor Who Is About to Abandon My Project?

Three signs your contractor may be heading toward abandonment: they keep asking for money ahead of the agreed draw schedule, crew shows up less and less frequently with no explanation, and calls or texts go unanswered for 3-5+ days at a stretch.

Based on typical project data from Bay Area contractors, abandonment becomes most likely at two points in a job: right after the first large draw is collected, and when unexpected issues are discovered (rotted framing, out-of-code electrical, etc.) that the contractor did not price for. They get in over their head and disappear.

Here is what to watch for during construction:

• Requests for draws ahead of schedule: If your contract says the second draw is due at rough framing, and they ask for it before inspection sign-off, that is a red flag
• Rotating crew with no one consistent: Legitimate GCs have a core crew. If every week brings entirely new faces who do not seem to know what they are doing, something is wrong
• No building permit on-site: California law requires the permit to be posted at the job site. If you cannot find it, either it was never pulled or your contractor is hiding something
• Failing inspections repeatedly: One failure is normal. Two or three failed inspections on the same work means a serious competence problem
• Subcontractors contacting you directly for payment: If the plumber or electrician starts calling you because the GC has not paid them, you are about to get a mechanics lien

If you are in active construction, platforms like Opsite let contractors share real-time project updates through a client portal - so you can see daily logs, inspection status, and document uploads without having to chase your GC for information. If your contractor has nothing like this to offer, at minimum they should respond to a text within 24 hours during active work. More than 48 hours of silence on an active job is not an inconvenience. It is a warning sign.

What Should I Do Before Signing Anything With a Contractor?

Do these five things before you sign any contract: verify the CSLB license, call their references, get the COI in hand and call the insurer, confirm permits are included in the scope, and read every line of the draw schedule.

Based on industry data, homeowners who skip even one of these steps are significantly more likely to end up in a dispute. Here is the full pre-signing checklist:

1. CSLB license lookup: cslb.ca.gov, license number active, no disciplinary actions in the last 3 years
2. Call 3 references from the last 12 months: Ask specifically - "Were there change orders? How much did the final cost differ from the bid? Would you hire them again?"
3. Certificate of Insurance in hand: Call the broker, verify GL ($1M minimum) and workers' comp are active and will remain active through your project end date
4. Permits confirmed in writing: The contract should state who pulls permits (it should be the GC, not you) and permit costs should be itemized
5. Draw schedule reviewed: Every draw tied to a milestone or inspection, no single draw over 25-30% of total contract value, final draw (5-10%) held until punch list complete
6. Contingency budgeted: Add 15-20% to whatever the contract says. Not 10%. Every project uncovers something unexpected once walls open up

As a licensed GC who has completed hundreds of remodels, I will tell you the single most important thing: the contractors who resist any of these steps are the ones you need to worry about. A legitimate contractor with nothing to hide will hand you their COI without being asked, give you the permit numbers once pulled, and put every scope item in writing. Resistance to transparency is itself a red flag.

If you want to see how modern construction management looks from the contractor side - including client portals, digital change order approvals, and document tracking - take a look at what Opsite offers. When your contractor uses organized project management tools, it protects you as much as it helps them.

Frequently Asked Questions

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

California law (Business and Professions Code Section 7159) caps contractor deposits at 10% of the total contract price or $1,000 - whichever is less. Any contractor asking for more than this upfront is violating state law. If a contractor asks for 30%, 40%, or 50% down before starting work, that is a major red flag and potentially illegal.

Can I hire an unlicensed contractor in California to save money?

You can, but you are taking on enormous risk. Unlicensed contractors cannot legally pull permits. If unpermitted work causes damage or injury, your homeowner's insurance may deny coverage. You also have no CSLB recourse if something goes wrong. The short-term savings are almost never worth it.

What is the CSLB and how do I use it to check a contractor?

The CSLB is the California Contractors State License Board - the state agency that licenses and regulates contractors. Go to cslb.ca.gov, click 'Check a License,' and enter the contractor's license number. You will see their license status, bond status, workers' comp status, and any disciplinary history. It is free and takes 30 seconds.

What is a lien waiver and why do I need one?

A lien waiver is a legal document where a contractor or subcontractor releases their right to file a mechanics lien against your property in exchange for payment. Without lien waivers, you can pay your GC in full and still end up with a lien on your home from a sub or supplier your GC never paid. Always get a conditional lien waiver with each progress payment and an unconditional lien waiver at project completion. Understanding how draw schedules and lien waivers work together is covered in detail at our draw schedule guide.

How many bids should I get for a remodel?

Three bids minimum. Not two, not one. Three. With two bids you have no context to evaluate whether either number is reasonable. With three, patterns emerge. If two bids cluster around $110,000-$120,000 and one comes in at $72,000, you know something is off with the low bid.

What should I do if my contractor abandons the job?

Document everything immediately: photos, last date crew was on-site, all payments made, all written communications. File a complaint with the CSLB at cslb.ca.gov - they have an enforcement division that investigates abandonment. Do not make any further payments. Consult a construction attorney before hiring another contractor to complete the work, as the original contract terms affect your legal position.

Is it a red flag if a contractor asks me to pull the permit instead of them?

Yes. When a homeowner pulls a permit, they become the 'owner-builder' of record and take on liability for code compliance. Licensed contractors are required to pull permits under their own license for work they perform. A contractor who asks you to pull the permit may be trying to avoid liability, or may not have the license classification needed for the work.

What is a punch list and why does the final payment depend on it?

A punch list is the written list of incomplete or defective items identified at the end of a project that the contractor must fix before receiving final payment. Your final draw - typically 5-10% of the contract - should be held until the punch list is signed off by both parties. Releasing final payment before the punch list is complete removes your only leverage to get items fixed.