What are the risks with choosing a general contractor that isn’t licensed
in a state that doesn’t require general contractors to be licensed?
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As far as GC’s go, I don’t personally see it as a risk. You just need to do a little bit more research on them, making sure they are reputable in their area, etc. Also obtain proof of insurance and verify that any trade that is required to be licensed (electrical, plumbing, etc.) is in fact up to date, registered, etc.
I live in TX as a general contractor and do not have a license, my necessary trades do.
I am a general contractor and It is the law here in Pennsylvania that contractors must be licensed with the state. It honestly does not cost very much and it’s every three years you have to pay. I would be very sceptical of this contractor and prob not hire cause this persons inexperience with a simple cheep construction practice. They probably are hiding something…
It really depends on the state. Here in Illinois General Contractors are not required to be registered with the state. They are however required to be registered within the municipality which they are performing services. This assures that they are insured and bonded. From a customer prospective it would also be valuable for your contractor to be ICC Certified or Home Builders Association Certified.
Best not to hire them. Better safe than sorry. Quality of work is probably not as good as licensed. you get what you paid for.
Honestly I feel its not relevant. I have done work on so many projects where a “licensed” builder completed work that was so sub par it was astounding. Likewise I have seen great work by unlicensed contractors. Imho the license often times gives homeowners a false sense of security. I would suggest instead you perform your due diligence. Ask for references, ask for photos of past work, and educate yourself about the project your hiring the contractor for and ask him tough questions to see if he’s on top of things. The “test” for being licensed here in Massachusetts is a joke and its certainly more about the state making money than anything else!
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In California, a contractor must be licensed, and pull a building permits for the projects he preforms.
A license has nothing to do with the quality of the work that will be preformed. It just shows that the contractor took extra steps to obtain a licenses. Some states just require that you have insurance and some make you take a test.
Bottom line. The customer should do there own research no matter what the contractor has.
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if you hire unlicensed contractor
Depends on where you live and the laws in that area. The most important aspect is that they are able to obtain a permit and file a NOC for the project. In Florida if you hire unlicensed GC and they do the job, you pay them and they screw over the subs you will be liable for paying them as well in essence you are paying double for work. License and permitting protects against that and Florida has a home owners fund which you are allowed to draw out of if a licensed contractor screws up your house. You also know with a licensed contractor you have insurance protection, last thing you want is a unlicensed and uninsured contractor or sub getting hurt on your property and suing the property owner for damages. Or if they cause damage or burn down your house during the construction process you want to be covered. Do the right thing and hire a vetted professional who not only has the proper knowledge but also the proper liability coverage to protect you and your asset. 
The homeowner doesn’t necessarily have any increased risk between choosing a licensed or unlicensed contractor… a homeowner can hire whoever they want.
However, if an unlicensed contractor is hired in an area where contractors are required to be licensed, and he gets busted, and you’ve already paid him a substantial deposit, and he can’t finish the work, he will be unable to finish the job and ya better hope he gives your money back.
But risks of lawsuits due to injuries, shoddy work/warranties, etc are all the same whether you hire licensed or unlicensed… but seriously, if he’s supposed to be licensed, and he’s not, he’s already not playing by the rules… would you want an unlicensed doctor performing heart surgery on you??
Hey there, It might be pretty risky because unlicensed contractors don’t carry any liability and therefore they are under no circumstances feel liable towards the customer
Yes it is extremely important to hire a licensed general contractor even in the state that does not require a state license. It is the general contractors responsibility to ensure that the subcontractors are properly qualified and that their work is done according to specs. Is much more likely to be done with a licensed contractor than the alternative.
The risk out weighs the reward
The largest reason why choosing a Hi Contractor are unlicensed contractor is it if the job was to go haywire and something was to happen with your home and let’s just say for example a fire was started because you had an unlicensed Electrician perform work in your home when you go to file an insurance claim on that damage your insurance company is going to ask you for a for the permits of that jobAnd if it was not permitted properly and completed by a licensed technician they will not cover the repair cost to your home
your always at risk when you hire anyone…so to say just because a contractor isn’t licensed your going be screwed over and there a bad contractor is a misconception … facts of knowing that a contractor is licensed there’s a less chance something could go wrong because there not going to want to put there company in jeopardy… but there are a lot of great trustfully contractors that would go outside there way to make sure things go right for you… the best thing to do ( that most people say they do but don’t) “referrals” is to contact someone that that contractor did work for if that person is happy the’ll let you know…that’s really the best response you can get when hiring someone you never met…
The risk of choosing a unlicensed contractor is that you may in some states forfeit your right to sue them in court should your project go sideways. By choosing a licensed, bonded and insured contractor you greatly reduce the risk of being completely responsible for any and all costs associated with a project that goes sideways.
Purely as a example:
You receive 3 estimates (which is a very good idea anyway) for say a skylight install.
1st contractor is licensed, bonded, and insured. His bid is $5k.
2nd contractor is licensed, bonded and insured. His bid is $7500.
The third contractor is not licensed, bonded, or insured. His estimate is $3000.
You think to yourself wow that’s a much better price, and choose contractor #3. Contractor #3 is a great talker and insists you pay the $3k up front. You do. He shows up to do the work, cuts a huge hole in your roof, maybe he cuts into the trusses, doesn’t finish the job because he screwed up, it rains, now you have water damage as well.
Contractor 3 disappears, does not return calls, etc. You have to fix the skylight and leak with more money to hire another contractor.
If contractor #1 or 2 had done the work you would have been able to file a claim against their insurance, take the company to court, file a complaint with the licensing board against their license etc.
However since you chose a unlicensed contractor you’re financially on the hook for all. So you’re 3k skylight is now a $10k + skylight.
Just totally hypocritical and food for thought!
By NOT hiring a licensed, bonded, and insured contractor.
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Depending on state contracts are void with unlicensed contractor.
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If they damage your property it’s easier for them to Disappear and not pay.
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If their employees get hurt at your property you or your home insurance has to pay.
In terms of quality, someone having a license doesn’t necessarily mean that they’ll deliver a better final outcome, though that is often the case. The risk is that they are not insured (which is often needed to get licensed) in case something goes wrong. Additionally getting a permit for a project will often require a licensed contractor. Hiring a licensed contractors gives you extra assurance and insurance for your project.
Not only you are risking Yourself with getting A lousy product, being responsible for the crew performing a job in your house if someone gets hurt. There is a reason why contractors pay the high insurance premium, Bond, and a liability in case your home gets damaged
you may find yourself having to demolish everything and rebuild by a licensed contractor if your local HOA of state regulator request the job to show on the blueprints with permits,
this is a situation we are now in helping a young couple who wanted to save some $ and haired two folks they met at home depot, we are now demolishing all concrete flooring that they placed and rebuilding, this is all happening since a few days after the work was finish the HOA requested plans and permits for the job, very unpleasant situation and they end up paying more