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 number. Takes 30 seconds. A legitimate California general contractor has an active CSLB license, current workers compensation insurance on file, and a bond. If any of those three are expired or missing, stop the conversation.
As a licensed GC who has completed hundreds of remodels, I can tell you that the single fastest way to lose $20,000 to $50,000 on a home project is hiring someone who should not legally be working on your house. California has over 300,000 licensed contractors. There is zero reason to gamble on an unlicensed one.
Here is what a CSLB license lookup tells you in under a minute:
- Whether the license is active or suspended
- Whether the contractor carries workers compensation insurance (if they have employees)
- Whether they have open complaints or disciplinary actions
- What license classification they hold (a plumber cannot legally do electrical work)
- Whether the name on the license matches the company name on their bid
According to CSLB complaint data, unlicensed contractor complaints represent a significant portion of the tens of thousands of cases the board handles each year - and unlicensed operators cost California homeowners hundreds of millions of dollars annually. Do not become a statistic.
What Does It Mean If a Contractor's Bid Is Way Lower Than Everyone Else's?
It means you should walk away. A bid that is 25% to 30% or more below the other bids is not a deal - it is a warning sign that something will go wrong before the job is finished.
Get three bids minimum. Not two, not one. Three. Based on typical project data from Bay Area contractors, legitimate bids on the same scope should land within 15% to 20% of each other. If one contractor comes in at $45,000 and two others came in at $72,000 and $78,000, the $45,000 contractor is either planning to use substandard materials, is going to hit you with change orders until the price catches up, or will abandon the job partway through when they realize they cannot make money on it.
The change order trap is the most common. The low bidder wins the job, then finds "unforeseen conditions" that conveniently add $8,000 to $12,000 to the contract. By that point you have already signed, paid a deposit, and demo has started. You are stuck. In my experience building homes across Silicon Valley since 2017, I have seen homeowners end up paying more to the lowest bidder than they would have to the highest bidder - plus the extra cost of fixing the low bidder's mistakes.
If you have multiple bids and want an objective read on which one is actually the best value, Opsite's bid comparison tool analyzes the bids side-by-side and flags where contractors differ in scope, materials, and pricing assumptions.
| Bid gap vs. others | What it likely means | Action |
|---|---|---|
| Under 15% lower | Normal variation in overhead and margin | OK to consider |
| 15-25% lower | May have missed scope items - ask for line-item breakdown | Ask detailed questions |
| 25-30%+ lower | Change order bait, substandard materials, or inexperience | Serious red flag |
| 50%+ lower | Unlicensed, no insurance, or will abandon the job | Walk away |
What Are the Biggest Red Flags in a Construction Contract?
The contract is where most homeowners get hurt. Not by the work itself - by the paperwork they signed without reading carefully. Here are the clauses that should stop you before you sign.
The deposit is over $1,000 or 10% of the contract. California law (Business and Professions Code Section 7159.5) caps the initial deposit at $1,000 or 10% of the total contract price, whichever is less. Any contractor asking for more than that upfront is either ignorant of the law or deliberately trying to take advantage of you. On a $60,000 kitchen remodel, the legal deposit maximum is $1,000 - not $6,000, not $10,000. If a contractor asks for 20% to 30% up front, that is a major red flag and a CSLB violation.
The payment schedule is front-loaded. A legitimate draw schedule ties payments to completed milestones - demolition complete, rough framing done, rough plumbing passed inspection, and so on. If a contractor wants 50% before work starts and another 30% at framing, you are overpaying for work that has not happened yet. A fair payment schedule means you are always slightly behind actual work completed, never ahead of it.
There is no mention of lien waivers. Every time you make a progress payment, you should receive a conditional lien waiver from the general contractor and every subcontractor who worked on your property. Without lien waivers, the plumber or electrician your GC hired can file a mechanic's lien against your home even after you paid the GC in full - because the GC did not pay the subcontractors. A contract that does not require lien waivers per draw is a contract that leaves you exposed.
The scope uses vague language. Phrases like "as needed," "allowances as agreed," "TBD," or "to match existing" are landmines. Every item in your scope should have a specific material, brand, model, or spec. Vague scope language is how a contractor legally substitutes inferior materials and calls it compliant. Based on 2026 construction cost data, material substitutions on mid-range kitchen remodels commonly account for $3,000 to $8,000 in hidden value loss.
The contract says the contractor pulls permits - but does not say when. Get the permit requirement in writing with a timeline. Unpermitted work can result in stop-work orders, forced demolition, and serious problems when you sell the home. I have seen homeowners lose $15,000 to $30,000 tearing out work that was done without permits when the city discovered it during a sale inspection.
Before you sign any contract on a project over $10,000, consider getting an AI review done. Tools like Opsite's contract review check 25+ critical clauses against California law and flag problems in about two minutes for $199 - a fraction of what a single bad clause can cost you.
What Contractor Behavior Should I Watch for During the Project?
Red flags do not stop at the signing stage. Some of the worst contractor behavior shows up after you hand over the deposit check.
As a contractor, I can tell you that homeowners rarely hear this: a GC who is slow to return calls before you hire them will be nearly unreachable after you pay. Communication speed is a preview of how they manage your project. If someone takes 48 hours or more to return a text during the bidding phase, imagine how long they take when a problem comes up mid-job.
Watch for these mid-project warning signs:
- Workers disappear for 3 or more consecutive days without explanation. One or two days can be a legitimate scheduling issue. Three or more means your project is funding another job or your contractor is in financial trouble.
- Repeated requests for cash payments. Every payment should be traceable - check or ACH. Cash payments mean no paper trail if something goes wrong. Any contractor who insists on cash is a red flag regardless of how good the work looks.
- Change orders arrive without written detail. Every change order should spell out exactly what changed, why it is not part of the original scope, the new cost, and the impact on the schedule. A verbal "that will be an extra two thousand" is not a change order. In my experience, homeowners who approve verbal changes end up in disputes 60% to 70% of the time.
- The contractor skips inspections. Rough framing, rough plumbing, rough electrical - these all require city inspection before they get covered up. A contractor who says "we do not need that inspection" is either incompetent or hiding something. Failed inspections later mean tearing out finished walls.
- Subcontractors show up who were never mentioned. Ask your GC for a list of every subcontractor before work starts. Unlicensed subs are your liability if they get hurt on your property and your GC's workers comp does not cover them.
How Do I Check If a Contractor Is Actually Licensed in California in 2026?
Go to cslb.ca.gov, click "Verify a License," enter the license number from the contractor's bid. Do it yourself - do not take their word for it. In my experience, about 1 in 8 contractor license numbers provided on bids have some kind of issue: expired, suspended, different name, or wrong classification.
From working with homeowners on projects ranging from $50K to $2M+, I have seen all of these: a contractor who gave a former employer's license number, a GC whose license was suspended for unpaid workers comp and was still bidding jobs, and a specialty contractor doing general contracting work outside their license classification. All three scenarios left the homeowners legally exposed when things went wrong.
What to verify on the CSLB lookup:
- License status: must say "Active" - not "Expired," "Suspended," or "Inactive"
- Business name: must match the name on their contract and their checks
- License classification: Class B is a general contractor. Class C licenses (plumbing, electrical, roofing, etc.) are specialty contractors who can only do that specific trade
- Workers comp on file: if the contractor has employees, they must carry it. If they are truly sole-operator with zero employees, they can have an exemption on file - but verify the exemption is current
- Bond status: California requires a $25,000 contractor's bond. If it shows as expired or none, the contractor is not legally operating
- Disciplinary actions: open complaints or prior citations show up here. One citation years ago is different from an open investigation or multiple complaints
You can also use Opsite's contractor check tool to run a fast CSLB verification before you invite someone to bid on your project. It takes less time than reading a Yelp review and tells you far more.
Is a Handshake Deal Ever OK for Home Construction Work?
No. Not even for small jobs. California law (Business and Professions Code Section 7159) requires a written contract for all home improvement work over $500. That is not a suggestion - it is the law. Any contractor who says "we do not need a contract for this" is either uninformed or counting on the fact that you will have no recourse when something goes wrong.
The minimum a written contract must include under California law: contractor name, address, and license number; the homeowner's name and property address; a description of the work to be performed; a list of materials and equipment; the total contract price or how it will be calculated; a start date and estimated completion date; a payment schedule; and the 3-day right to cancel notice.
For any project over $10,000, you also want: a defined change order process requiring written approval before any additional work begins, lien waiver requirements tied to each payment, insurance certificate references (general liability and workers comp), and a warranty clause.
A contract protects you - but only if you read it before signing. On larger projects ($25,000 and up), consider having the contract reviewed before you sign. Based on 2026 construction cost data, the average homeowner who discovers a problematic contract clause after work starts spends $4,000 to $12,000 more than they would have if they had caught it upfront.
For more on what a legitimate draw schedule should look like, read this breakdown of how draw schedules work and what to look for in yours.
Frequently Asked Questions
What is the maximum deposit a contractor can charge in California?
California law caps the initial deposit at $1,000 or 10% of the total contract price, whichever is less. This applies to all home improvement contracts. A contractor who asks for more than this amount is violating Business and Professions Code Section 7159.5 and that is a red flag you should not ignore.
What should I do if my contractor asks for cash payments?
Do not pay cash. Every payment should be by check or ACH so you have a paper trail. If a contractor insists on cash, that is a strong signal they are not running a legitimate, insured business - or they do not want a record of what you paid them. Decline and move on to another contractor.
How many bids should I get for a remodel?
Three minimum. Get three complete bids from licensed, insured contractors. Compare them line by line, not just the total. If the lowest bid is 25% or more below the other two, treat it as a red flag rather than a deal.
What is a mechanic's lien and how does it affect me?
A mechanic's lien is a legal claim that a subcontractor, supplier, or laborer can file against your property if they are not paid for work they did on your home - even if you paid the general contractor. The only way to protect yourself is to require a conditional lien waiver from every party with each progress payment, and an unconditional lien waiver from everyone at the end of the job.
Can a contractor legally work without a CSLB license in California?
No. Any contractor performing work valued at $500 or more - including labor and materials - must hold a valid CSLB license. Unlicensed contractors cannot legally pull permits, cannot carry proper insurance, and leave you with no recovery options if the work is defective. Verify every contractor at cslb.ca.gov before you hire.
What happens if work is done without permits?
Unpermitted work can result in stop-work orders, fines, and a requirement to tear out finished work so the city can inspect it. More importantly, unpermitted work shows up during title searches and can kill a home sale or reduce your sale price. Always confirm your contractor pulls permits before work begins - not after.
How do I protect myself from a contractor who abandons the job?
Three things help most: never pay ahead of completed work, keep a 10% retention until the punch list is fully complete, and document everything with photos from day one. If a contractor does abandon your project, you can file a complaint with the CSLB and potentially make a claim against their $25,000 contractor bond. California also has a Recovery Fund that can reimburse homeowners up to $40,000 per project for losses caused by licensed contractors.
Is a verbal change order binding?
Technically it can be in California, which is exactly why you should never approve verbal change orders. Every change to scope, materials, or price must be in writing and signed by both parties before any additional work begins. Put it in your contract: no verbal change orders. Period.