A general contractor is someone you hire to coordinate a home improvement project. Although most will take on any sort of project, they are normally used for bigger projects or in cases where there are multiple projects to be completed. Traditionally general contractors will have some workers on their payroll to handle demolition, carpentry, electric, plumbing, and other basics; for everything else they will hire various subcontractors, or "subs" (the balance of subs to staff varies). Often times, they will have a relationship with certain subs that they know and trust.

What does a General Contractor Cost?
Using a general contractor instead of "sub-ing out" the work yourself will usually cost around 10-20% more on average. In some cases, however, it may actually cost less than doing it yourself, particularly if you don't get multiple bids when hiring subs. Often the general contractor's staff can do certain jobs for less than subs.

What are the Advantages?
There are a number of advantages to hiring a general contractor. First, it makes larger, more complex projects more manageable, since you can leave many of the details to someone else (finding subs, making sure the work is done and done right, paying the sub, etc.). Second, experience in coordinating some of the more general aspects of projects can be very valuable (e.g. knowing which parts of a project need to happen in what order, when and how to get permits, and issues of licensing/bonding). Finally, since general contractors have established relationships with certain subs, providing them with regular business, it is not uncommon for a general contractor to be quietly bumped up on the schedule of projects because they want to keep the general contractor happy. In other words, a general contractor can make a project move faster and with less heartache for you.

Getting it Right
If you do decide to use a general contractor, interview him or her thoroughly. Be sure to check references, get multiple bids, and get a very specific itemized cost breakdown as part of the contract. It is customary to add 5-15% to a bid to cover unforeseen costs. Any use of this "contingency fund" should be formally approved by you. The best way is to use a "change order" form, so you have it in writing. Note that if you plan on getting a loan to do a major project, the lender will often require that you hire an experienced general contractor unless you can demonstrate substantial experience in the field.

There are cases where a contractor and owner disagree about the cost of a change to the project - the formal procedure for handling these is called a Change Order Request.

Lien Waivers
Consider the following situation: You hire a general contractor to renovate your kitchen and as part of the work, your contractor then hires a plumber to relocate the sink. When you receive a bill from the contractor, you assume that the plumber is subsequently paid. However, if the general contractor neglects to pay the plumber, the plumber (or any subcontractor or supplier in the same situation) can file a "lien" against your property for the amount owed.

Such a lien is charged against the future sale of the property and you cannot transfer title until the lien is paid. Therefore you could be forced to pay for the plumbing work twice: once to the contractor, and once to the plumber.

A "lien waiver" is a document that helps ensure you will not be forced to pay twice for work performed on your property. Most lenders require signed lien waivers for work performed before they will release funds to the contractor. If you are paying for the work out of pocket, you may request a signed lien waiver before you write your check. In general terms, a lien waiver should include the following information:

• name of the company
• the address where work was performed
• the service performed
• A statement to the effect that all subcontractors and suppliers have been paid
• The amount paid, and
• A notice that in consideration of the sum paid the contractor releases any and all claim or right to lien on the property on account of labor or materials

This language may take several forms, so if you are concerned about its enforceability in your situation, you should have a lawyer take a look at it.

Most lenders require borrowers to purchase "title insurance" to protect against unknown liens against the property you are purchasing. Liens may be discovered during a title search and can jeopardize your closing if not taken care of appropriately.

Check out the MO State Attorney General web page on lien law for additional information about applicability of lien waivers in Missouri.