Real Estate Rehab Contracting 101, Part 3

Welcome back everyone; let us unpack Rule #2, Verify the Contractor, their license and specialties, insurance and qualifications/ and references.

As a customer you have the choice whether you want to cut costs or pay for lower risk.  It is really that simple, the cheaper the contractor usually means the more risk you are assuming in their performance and potential liability concerns.


What I mean by this is a fully licensed and insured contractor will obviously have a higher overhead than someone who is working for a minimal hourly wage because they may not have the necessary licenses, specialty designations, and insurances required to perform according to the requirements set forth in your area.


So if someone who is doing electrical work and tells you they have a journeyman’s license (and/or a lot of experience), well then they are not legally allowed to perform work as a contractor, only to work for a licensed contractor.


The State of Virginia has three classes of contractors, Class A, B, or C, and they represent the amount of an individual contract my not exceed and the annual total revenue limit. Class C is the lowest value and Class A is the highest value.  Also, to qualify for Class B and A there are several requirements that include education, examination, and company financial statements.


Further, the State of Virginia requires contractors to have specialties and classifications for each type of work the contractor may perform and there are several but for brevity I am listing a few here.  Some examples of specialties would be HVAC, Electrical, Asbestos, Foundations/ Concrete, Framing, and Plumbing.


Why would it be best to hire a properly licensed and insured contractor?


Lets say you hired a electrical installer to cheaply perform a panel change out and he failed to ground the Panelboard correctly, instead of installing a grounding conductor to an exterior ground rod, they chose to attach to a nearby plumbing copper pipe. Well, during the renovation, your plumber used plastic pipe instead of copper because it was cheap and easy and now you have an electrocution hazard.  Lets say the new homeowner was showering during an electrical storm and was electrocuted and died in the nice pretty shower you sold them.


Who is responsible for that? Well the judge will certainly figure it out that you chose to be cheap instead of responsible.


Do you really need to save a few hundred bucks to have to live with this poor choice that created a life safety issue?


I trust this resonated with someone and may help you to value your contractors a little differently.


Next article I will talk about the insurance required for contractors and how you can insure you and your project with their insurance policy!

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