1. Get Recommendations:  Start with your friends and family and then check in with the National Association of the Remodeling Industry for a list of members in your area. You can also talk with a building inspector, who'll know which contractors routinely meet code requirements.

2. Do Phone Interviews: Once you've assembled a list, Realty Direct recommends that you make a quick call to each of your prospects and ask them the following questions:

• Do they take on projects of your size?


• Are they willing to provide financial references, from suppliers or banks?


• Can they give you a list of previous clients?


• How many other projects would they have going at the same time?


• How long have they worked with their subcontractors?

The answers to these questions will reveal the company's availability, reliability, how much attention they'll be able to give your project and how smoothly the work will go.

3. Meet Face to Face: Based on the phone interviews, pick three or four contractors to meet for estimates and further discussion.

4. Investigate the Facts:  Call up former clients to find how their project went and ask to see the finished product.

5. Get Bids:   Compare bids, ask everyone to break down the cost of materials, labor, profit margins and other expenses. Generally materials account for 40 percent of the total cost.

6. Set a Payment Schedule:  Payment schedules can also speak to a contractor's financial status and work ethic. If they want half the bid up front, they may have financial problems or be worried that you won't pay the rest after you've seen the work. For large projects, a schedule usually starts with 10 percent at contract signing, three payments of 25 percent evenly spaced over the duration of the project and a check for the final 15 percent when you feel every item on the punch list has been completed.

7. Don't Let Price Be Your Guide:  "Throw out the low ball bid," says Tom. "This contractor is probably cutting corners or, worse, desperate for work"—hardly an encouraging sign in a healthy economy. Beyond technical competence, comfort should play an equal or greater role in your decision. The single most important factor in choosing a contractor is how well you and he communicate. All things being equal, it's better to spend more and get someone you're comfortable with.

8. Put it in Writing:  Draw up a contract that details every step of the project: payment schedule; proof of liability insurance and worker's compensation payments; a start date and projected completion date; specific materials and products to be used.