Warning Signs of a Bad Contractor and How to Protect Yourself in Texas

Most contractors are honest people trying to do good work. But anyone who has lived in the Houston area for a while, especially after a big storm, has heard about someone who took a deposit and disappeared, or about a job left half finished.

We’re a local contractor, and we’d rather you hire carefully, even if that means you don’t hire us. Here’s what to look for and how to protect yourself.

First, Know This About Texas

Texas does not have a statewide license for general contractors or remodelers. In many other states, a general contractor has to pass an exam and hold a state license. Texas had a state agency that registered home builders and remodelers, the Texas Residential Construction Commission, but it was abolished in 2009 and nothing replaced it. Some cities do require contractors to register locally before pulling permits. Pasadena requires annual contractor registration, Kemah and Baytown make contractors register through their permit portals, and Pearland requires general contractors to be registered with the city and keep insurance on file.

Some trades are licensed by the state:

• Plumbers are licensed by the Texas State Board of Plumbing Examiners (TSBPE).
• Electricians and air conditioning and refrigeration (HVAC) contractors are licensed through the Texas Department of Licensing and Regulation (TDLR).

Both agencies let you look up a license online: TDLR through its License Search, and TSBPE through the license lookup linked from its website.

So “Are you licensed?” isn’t the right question to ask a general contractor in Texas. Ask these instead: Are you insured? Will licensed tradespeople do the plumbing, electrical and HVAC work? Will you pull the permits?

Warning Sign 1: They Want Most of the Money Up Front

This is the biggest one. A contractor who wants half or more of the job paid before any work starts is a risk. If they disappear, your money goes with them.

A reasonable deposit to get on the schedule and order materials is common. After that, payments should follow completed work: demo done, rough-in passed inspection, cabinets installed, and so on. Hold the final payment until the job passes final inspection and the punch list is finished.

Never pay most of the job up front.

Warning Sign 2: No Written Contract

A handshake isn’t a contract. A written contract should include:

• A detailed scope of work, including what’s included and what isn’t
• Materials and allowances
• Total price and payment schedule
• An estimated start date and timeline
• How change orders work, in writing and with a price before the work is done
• Who pulls permits
• Warranty terms
• Cleanup and debris removal

Texas has specific rules about contracts and liens on homestead property. For a contractor to have a valid lien on a homestead, the written contract has to be signed before any work starts or materials are delivered, signed by both spouses if the owner is married, and filed with the county clerk (Texas Property Code §53.254). A home improvement contract for an existing homestead also has to include a specific “IMPORTANT NOTICE” warning in bold type, telling you that you could lose ownership rights in your home if you don’t meet the contract’s terms (Property Code §41.007). If you’re doing significant work on your home, read these rules, and consider talking to a real estate attorney before signing a large contract.

Warning Sign 3: They Can’t Show Proof of Insurance

Ask for a certificate of insurance showing general liability coverage. Better yet, ask for it to be sent directly from their insurance agent. If someone gets hurt or your property gets damaged, you don’t want to be the one paying.

Also ask how the contractor’s subcontractors are covered. In Texas, private employers can choose whether to carry workers’ compensation insurance; in most cases it isn’t required. Employers without it (“non-subscribers”) have to file a notice with the Texas Department of Insurance, Division of Workers’ Compensation, every year. So ask the question directly.

Warning Sign 4: “We Don’t Need a Permit”

If the work involves plumbing, electrical, gas, structural changes or major renovation, there’s a good chance your city requires a permit. A contractor who tells you to skip the permit to save time or money is putting the risk on you. Unpermitted work can cause problems with insurance claims, home sales and safety.

Ask: Who is pulling the permit? Can I see it? It should be posted at the job site.

Warning Sign 5: Pressure to Sign Today

Watch out for “This price is only good today,” “I have leftover materials from a job down the street,” or “I just happen to be in the neighborhood.” These are classic sales pressure tactics, and door-to-door contractors use them a lot after storms. A good contractor will give you time to think and compare.

Warning Sign 6: No Local Track Record

Look for:

• Online reviews on several sites, not just one. Read the negative reviews and how the contractor responded.
• The Better Business Bureau (BBB) profile, including complaints and how they were resolved.
• References from recent jobs that are similar to yours.
• A real business presence: a working phone number, a website, and a business name you can look up.

Warning Sign 7: A Bid That’s Much Lower Than Everyone Else’s

When one bid is far below the others, ask why. Often the scope is missing something, the materials are lower quality, or the contractor plans to make up the difference with change orders later. Compare bids line by line.

Warning Sign 8: Poor Communication Before You Even Sign

If they’re slow to return calls, vague about details or can’t explain their process now, while they’re trying to win your business, it won’t get better once they have your deposit.

How to Protect Yourself: A Quick Checklist

• Get at least two or three written bids with the same scope.
• Ask for a certificate of insurance.
• Confirm that licensed plumbers, electricians and HVAC techs will do that work.
• Make sure permits are pulled.
• Get a detailed written contract.
• Tie payments to completed work.
• Check reviews, the BBB and references.
• Get every change in writing, with a price, before the work is done.
• Keep copies of everything.
• Ask for lien waivers from the contractor and major subcontractors and suppliers as you pay. In Texas, a lien waiver only works if it substantially follows one of the four statutory forms (conditional or unconditional, for progress or final payment) in Property Code §53.284 and is signed by the claimant. Nobody should sign an unconditional waiver until they’ve actually been paid (§§53.281–53.283). A common approach is to collect a conditional waiver with each payment and the unconditional one after the funds clear.

Frequently Asked Questions

Do general contractors need a license in Texas?

No. Texas has no statewide license for general contractors or remodelers. Plumbers (TSBPE), electricians and HVAC contractors (TDLR) are licensed by the state. Some cities, such as Pasadena, Kemah and Baytown, require contractors to register locally before pulling permits.

How much should I pay a contractor up front?

Keep the deposit reasonable and tie the remaining payments to completed stages of work. Never pay most of the job before work begins.

How do I check a contractor’s insurance?

Ask for a certificate of insurance and call the insurance agent listed on it to confirm the policy is active.

Hire with Confidence

At Green Dynasty Construction, we put the scope, price and payment schedule in writing, we tie payments to progress, and we’re happy to answer every question on this list. If you’re planning a project in La Porte, TX or anywhere in the Houston Bay Area, call 832-304-0636.