Are you struggling with how to best handle a bad contractor? No doubt, working with contractors ranks among the hardest parts of real estate investing.
However, as a real estate investor, unless you have a property manager, working with contractors unavoidably comes with the job, whether building a property, remodeling or making repairs.
Be proactive when learning about hiring or firing contractors so that if trouble arises, you are prepared.
Assemble All Evidence
The first step when dealing with a bad contractor is to gather all paperwork and evidence. During the hiring process, you should have collected copies of their license, bonding, and insurance paperwork and a clear written contract with the scope of work.
Take photos throughout each project stage, take notes about progress or lack thereof, delays, and so forth.
In addition to information about their work, keep records of all communication, including phone calls, emails, and texts. Specifically, any important agreement between the two of you should be put in writing. Unfortunately, we cannot trust the old “handshake” agreement in situations involving thousands of dollars.
Finally, keep track of all deposits, materials provided, and payments to the contractor. Make all payments either electronically or via check. Where is the money trail if you paid half of their bill in cash?
Additional Documentation to Support Your Case
Remember to maintain a collection of supporting evidence beyond the basic paperwork to strengthen your position if issues with the contractor escalate. Below are some of them:
| Evidence | Why It’s Important |
| Video Recordings | Provides dynamic proof of work conditions and progress |
| Building Permits | Shows proper authorization and compliance with local regulations |
| Material Receipts | Verifies actual costs and quality of materials used |
| Subcontractor Information | Documents who actually performed specific work |
| Expert Assessments | Third-party verification of work quality or problems |
| Timeline Documentation | Establishes a pattern of delays or missed deadlines |
Fire the Contractor
While this seems obvious, it is not always the most comfortable thing to do. Initially, your contractor will most likely challenge the firing as a breach of contract. This is precisely why having a record of how they actually breached the contract agreement first is key. Some things to consider as you document their misdeeds:
- Did they ever not show up when they were supposed to?
- Were non-agreed materials used?
- Did they consistently stick to the schedule?
- Did they go over budget?
Don’t dig yourself into a deeper hole. After you have compiled sufficient evidence of the contractor’s poor job, fire them immediately so that you are not continuously paying for bad or mediocre work.
File a Bond Insurance Claim
Before proceeding, note that you can only file a claim if the contractor is bonded. Therefore, you should only work with bonded and insured contractors for large projects.
You can reclaim the money you already spent by communicating with the contractor’s insurance company. Even the threat of filing a claim often persuades wayward contractors to finish the work. But do it properly! You never know when you need to escalate to the real thing.
File a Complaint to the State Licensing Board
If the contractor is licensed, you can file a claim to the state board if needed. No contracting company wants this to happen. Licensed contractors can charge more and earn more projects, so they don’t want to jeopardize their licensing in any way.
You can force the state board to act by threatening a complaint. In these cases, they will usually want to resolve the conflict, and you are also more likely to receive your money back. Look up your specific state’s complaints process for more information.
Go to Court
By filing a suit in a small claims court, you can receive justice at a small price. Not only are suits in small claims affordable, but they also offer the option for you to represent yourself with no attorney or legal fees.
Of course, if you paid your contractor a large amount, consider hiring an attorney even if the amount falls under the jurisdiction of small claims court.
Post Public Reviews
Although this strategy may not yield financial gains, the threat of posting poor reviews on many websites might convince the contractor to fix their faulty work.
Even if that doesn’t work, at least the next person looking to hire a contractor may think twice before hiring them.