I have seen it happen on $80,000 kitchen remodels and $500,000 additions alike. A homeowner finds a contractor, feels good about them, skips a few basic checks, and ends up with an abandoned job site, a depleted savings account, and a CSLB complaint that takes over a year to resolve. Every single time, the warning signs were there before anyone signed anything. Here is what to look for.
How Do I Know If a Contractor Is Legitimate Before I Sign Anything?
Go to cslb.ca.gov right now and look up their license number. Takes 30 seconds. If they cannot give you a license number, or it comes back expired, suspended, or in the wrong classification, walk away.
According to CSLB complaint data, unlicensed contractor fraud costs California homeowners over $300 million every year. Most of those victims hired someone through a neighbor's recommendation or a door-to-door solicitation and never checked a single credential.
Here is what you need to verify before any money changes hands:
- License status: Active only. Expired means coverage lapsed. Suspended often means disciplinary action or unpaid judgments against the contractor.
- License classification: A B-license covers general building work. A C-10 is electrical. A C-36 is plumbing. The classification must match the work you are hiring them for. A plumber cannot legally do structural framing on your home addition.
- Bond status: California requires a minimum $25,000 contractor bond as of 2026. No bond on file means no financial protection if they walk off the job with your money.
- Workers compensation: If they have employees, it must be on file with CSLB. If a worker is hurt on your property and the contractor carries no workers comp, claims can easily exceed $200,000. Your homeowner's insurance may not cover it.
As a contractor, I can tell you that every legitimate GC knows their license number by heart and hands it over without hesitation. The ones who get defensive or tell you they do not need a license for this type of work are the ones you do not want anywhere near your home.
Use the free license checker at homeowners.useopsite.com to pull live CSLB data and see a trust score based on license status, bond, workers comp, and any disciplinary actions on record.
Why Does a Bid That Seems Too Low Actually Scare Me as a GC?
If the lowest bid comes in 30% or more below the other two bids, that is not a deal. That is a contractor who either plans to hit you with change orders or will run out of money before the job is done.
Based on 2026 construction cost data, a mid-range kitchen remodel in California runs $80,000 to $150,000 depending on scope and location. If someone bids $42,000 for that same project, they are not finding efficiencies you missed. They are planning to make it up somewhere else.
In my experience building homes across Silicon Valley since 2017, the low-bid contractor follows one of three playbooks: they use cheaper materials than specified in the scope, they add change orders once your walls are open, or they run out of money and abandon the project halfway through. All three outcomes cost you more than hiring the right contractor at market rate from the start.
Get three bids. Minimum. Not two, not one. Three. Then compare them line by line - not just the totals. The estimate comparison tool at homeowners.useopsite.com lets you upload your bids and see a full side-by-side breakdown with AI-extracted line items and CSLB verification for each contractor.
| What You See in the Bid | What It Likely Means |
|---|---|
| 30%+ below the other bids | Expect change orders or job abandonment mid-project |
| No itemized line items - just a total | No accountability and impossible to compare fairly |
| Vague material specs ("tile allowance") | Budget substitutions are coming after you sign |
| 10-20% below the others | Worth asking questions - may reflect lean overhead |
| All three bids within 10% of each other | You have a real market price - safe to proceed |
For more on what a remodel should actually cost, see my breakdown at useopsite.com/blog/how-much-does-kitchen-remodel-cost.
What Are the Red Flags in a Contractor's Payment Demands?
California law caps the initial deposit at 10% of the contract price or $1,000 - whichever is less. Anyone asking for more than that before work starts is either breaking the law or planning to disappear.
This is one of the most commonly violated rules in residential construction, and one of the least known by homeowners. Under California Business and Professions Code Section 7159.5, the deposit cap is a hard legal limit for any licensed contractor. It is not a guideline. A contractor who asks for $10,000 upfront on a $40,000 bathroom remodel is violating state law - full stop.
From working with homeowners on projects ranging from $50K to $2M+, I have seen exactly how this plays out. The contractor asks for a large deposit, uses it on another job, and then yours moves slowly. By the time you realize what is happening, they are months behind and your money is gone.
| Payment Request | Red Flag or Legal? |
|---|---|
| 10% or $1,000 upfront, whichever is less | Legal - this is what California law allows |
| 33% or 50% upfront to "order materials" | Red flag - illegal for licensed contractors in CA |
| Cash only, no checks or bank transfers | Red flag - no paper trail, no legal protection |
| Full payment before any work starts | Serious red flag - walk away immediately |
| Progress payments tied to completed milestones | Correct structure - this is what you want to see |
A legitimate payment structure ties every draw to completed, inspected work. No milestone complete, no payment. That protects both of you. For a deeper look at how payments should flow, read my guide on draw schedules and how they protect homeowners.
Use the free deposit calculator at homeowners.useopsite.com to see the exact legal maximum for your project and get suggested language to push back if a contractor demands more.
What Else Should I Watch For When Evaluating a Contractor?
License and pricing are the biggest signals - but they are not the only ones. Three more red flags come up in nearly every problem project I have reviewed.
They avoid the permit conversation. Any contractor who tells you "we do not need permits for this" on structural work, an addition, an ADU, electrical, or plumbing is either uninformed or deliberately trying to avoid inspection. Unpermitted work creates problems when you sell the home, may void your homeowner's insurance, and will need to be disclosed to buyers. In some cases the work has to be torn out and redone at your expense. Permits in most California cities add 4-8 weeks to a project timeline. A contractor skipping that step is saving themselves the headache, not you.
They cannot provide references from the last 12 months. A contractor who has been doing good work recently has recent clients they will happily connect you with. "I have been too busy to keep track" or "my clients prefer privacy" are not acceptable answers. Call at least two references. Ask specifically: did the final cost match the original bid, and did the project finish within 4 weeks of the promised completion date? Based on typical project data from Bay Area contractors, cost overruns above 15% and delays beyond 4 weeks are common signals of poor planning or cash flow problems.
They take 48+ hours to respond during the proposal stage. If they are slow to respond when they want your business, they will be slower once they have your deposit. Communication speed during the bidding phase is a direct predictor of how they manage a live project.
As a licensed GC who has completed hundreds of remodels, I tell every homeowner the same thing: the 3 hours you spend vetting a contractor before signing will save you 3 months of misery after.
What Is the Full Red Flag Checklist for Hiring a Contractor in 2026?
Here is the complete list. Any one of these should make you pause. Three or more and you should not hire them regardless of price or timeline promises.
- No CSLB license number on their estimate or business card. Every licensed contractor is required to display their license number on estimates, contracts, and advertising.
- License is expired, suspended, or the wrong classification for the work being done. Verify at cslb.ca.gov - takes 30 seconds.
- Bid is 30% or more below the other estimates. Not a deal. A trap.
- Demanding more than $1,000 or 10% as a deposit before any work starts. This violates California law.
- No written contract. "We will figure it out as we go" is how you lose money. Every California construction job over $500 requires a written contract by law.
- Cash-only payment demands. No paper trail means no legal recourse.
- No permit discussion on work that clearly requires permits. Additions, ADUs, structural changes, electrical, plumbing - all need permits.
- Cannot provide a current certificate of insurance naming you as an additional insured on their general liability policy.
- No references from completed projects in the last 12 months. Ask for two and call them.
- Takes 48+ hours to return calls or texts during the proposal stage. Slow responsiveness before you sign becomes no responsiveness after.
Catching these flags early is the difference between a project that finishes on budget and one that ends in a CSLB complaint and a court filing. According to CSLB data, the average time to resolve a contractor complaint is 9 to 14 months. You do not want to be in that process.
Before you sign anything, run your estimates through the estimate comparison tool, verify the license at the license checker, and confirm the deposit is legal with the deposit calculator. All three tools are free and take less than five minutes combined.
Frequently Asked Questions
How much can a contractor legally ask for as a deposit in California?
California law caps the initial deposit at 10% of the total contract price or $1,000 - whichever is less. This is defined under California Business and Professions Code Section 7159.5 and applies to all licensed contractors. Any contractor asking for more is violating state law. Use the free deposit calculator at homeowners.useopsite.com/deposit to see the exact legal maximum for your specific project.
What does it mean if a contractor says they do not need permits?
It means they want to do work that will not pass inspection, may not be covered by your homeowner's insurance, and could need to be disclosed or even demolished when you sell. In California, any structural work, home addition, ADU, garage conversion, electrical, plumbing, or HVAC work requires permits. A contractor who tells you otherwise is either uninformed or trying to avoid the oversight that protects you.
Is it okay to hire an unlicensed contractor to save money?
No. In California, any project over $500 in combined labor and materials requires a licensed contractor. Hiring unlicensed means no CSLB protection if something goes wrong, no workers comp coverage if someone is injured on your property, and in some cases your homeowner's insurance can deny claims related to the unpermitted work. The short-term savings are not worth the long-term liability.
How many contractor bids should I get before hiring?
Three. Always three. Two bids give you no reference point for what is a fair market price. One bid means you are simply accepting whatever the contractor tells you. Three bids give you an actual market rate and let you compare how each contractor itemizes the scope of work. If the lowest bid is 30% or more below the others, treat that as a red flag rather than a deal.
What should a contractor's estimate include?
A legitimate estimate should list every line item: materials with specifications and quantities, labor by task, subcontractor scopes, allowances clearly marked as allowances, exclusions explicitly stated, and a payment schedule tied to milestones. If you receive a one-page document with a single total and no breakdown, that is not an estimate - it is a number with no accountability attached.
What is a lien waiver and do I need one?
A lien waiver is a document where a contractor or subcontractor confirms they have been paid and gives up the right to file a mechanic's lien against your property. Get a conditional lien waiver before every progress payment and an unconditional lien waiver at project completion. Without them, a subcontractor or supplier your GC failed to pay can put a lien on your home - even if you already paid the GC in full.
How do I check if a contractor has disciplinary actions on their license?
Search for their license at cslb.ca.gov and look at the full license details. CSLB publishes disciplinary actions including citations, suspensions, and revocations on the public record. You can also use the license checker at homeowners.useopsite.com/check which surfaces disciplinary actions alongside the full trust score breakdown. One prior citation does not automatically disqualify someone - context matters. Multiple actions or a revocation does.
What is a reasonable contractor markup on a remodel project?
A general contractor typically marks up labor and materials 15-25% as overhead and profit. This covers project management, insurance, bonding, and business operating costs. If someone bids with what appears to be zero markup, they are either hiding it elsewhere in the estimate or planning to recover it through change orders. The markup is not the enemy - surprise change orders are.