Dreaming about a new sunroom in your home? Pick the wrong contractor and you could end up with a big headache — and a gaping hole in your house — instead.

1. "My license is worthless."
When you hire a general contractor to come build an addition onto your house, you probably assume you're getting someone who has spent years learning his craft, giving him the proper credentials to saw a hole in the side of your den. In reality you could be getting a madman with a toolbox who answers to no one. That's because only 27 states have any licensing requirements, according to R.L. Bryson's "Contracting in All 50 States" — and where requirements do exist, they vary widely. In California, one of the stricter states, budding contractors must only prove their financial solvency and pass a written exam (sample test question: "Where would the drain and sewer for a residential building be located?").

Maybe that disparity helps explain why the category of home-improvement services — which tend to be completed or overseen by contractors — ranks first on the list of consumer complaints issued by the National Association of Consumer Agency Administrators.

So how should you shop for a contractor? Ask for references, of course, but don't just interview your candidate: Actually visit a job in progress to watch how he works. (If your would-be contractor doesn't have a job at the time, that alone is a bad sign.) Tom Pendleton, owner of McLean, Va.-based consulting firm The House Inspector, offers this advice: "I have a three-year rule," he says. "Close to 95% of home-improvement contractors go out of business or change their name (due to consumer complaints or mismanagement) within three years, so you want a contractor who's been in business under the same name for more than three years." A good outside source: Handyman Online (www.handymanonline.com), a referral service that can connect you with contractors in your area who are legitimately licensed, carry liability insurance and have at least three references.

2. "Our contract favors me..."
When it's time to sign on the dotted line, most contractors will present you with a boilerplate agreement based on one created by the American Institute of Architects. It lays out the job's details, including its scope, materials used and, of course, a payment schedule. Not surprisingly, according to Mark Levine, co-author of "The Big Fix-Up," a consumer guide to home remodeling, some contractors will set up a payment schedule that lets your money get ahead of the work. "When (a contractor) has received 50% of the money for 25% of the work, that's when he stops showing up as often," says Levine. He suggests a plan such as paying 10% down, 25% when plumbing and electrical work are done, 25% after cabinets and windows, and 25% for flooring and painting. "And don't hand him the last 15% on his final day. It's called 'retainage,' and you should keep it for 30 extra days just to make sure everything is working the way it should."

In addition, if the job is big enough — say, $50,000 or more — Levine suggests investing in four hours of attorney fees to devise a contract that includes a fair payment plan (with retainage) and stipulates that disputes will be settled through arbitration (the quick and easy way to do it).

3 "...so I can take your money and run."
Mark Zarrilli, a mortgage salesman with Bank of America, recently decided to enhance his Wall, N.J., home by putting a new cobblestone-like concrete path around his swimming pool. It was an $11,000 job, and he paid $7,000 up front to the contractors — supposedly for materials. "They brought somebody in to do the preliminary brickwork, then played a duck-and-run game for three months," says Zarrilli. "They'd tell me the truck broke down, the wife was sick, the cement company couldn't deliver. I'll never get my money back." A Monmouth County grand jury has issued an indictment against the contractor, but there's now a motion pending to dismiss it. (The contractor's lawyer, Sean Gertner, claims his client is not guilty of theft by deception, as charged: "He was thrown off the job.")

Mark Herr, director of the New Jersey Division of Consumer Affairs, calls this alleged scam "spiking the job," and it's one of the worst possible outcomes when you've signed a contract that includes a front-loaded payment schedule. "By completing a little bit of the work, they can face only civil rather than criminal charges," says Herr. You might get sucked into such a scenario if your contractor tells you — like Zarrilli's did — that the up-front cash is for materials. "Typically," says Herr, "that happens because the guy needs to pay up front for goods since he has no credit, probably because he screwed up somewhere else." Your preemptive strategy: Offer to have the materials delivered to your house and to pay for them C.O.D.

4. "Bargains don't exist in my world."
Before hiring a contractor, you'll probably solicit various bids. What happens when one comes in way lower than the others? It's natural to think you've lucked out.

Not necessarily, says Lisa Curtis, director of consumer services for the Denver district attorney's office. Because of the fixed costs of material and labor, a contractor who offers you a stunningly low price is suspect. Common tricks include starting the job based on a bargain-basement price, then telling the customer that the work is more complicated (and more costly) than originally thought. Then there's the contractor who quotes a price that includes windows he knows are subquality; once the job is under way, he'll present his client with what is clearly a better window and talk him into upgrading. "Ultimately," Curtis says, "you may pay more than you would have with a reputable person who started off at a reasonably higher price."

5. "I'll hold your house hostage."
The number of home-improvement projects in the U.S. has risen 25% in the past five years, according to Kermit Baker, director of the Remodeling Futures Program at Harvard University's Joint Center for Housing Studies. That means contractors are busier than ever — and because they're juggling so much work, you can pretty much expect that the schedule for completing your job will go out the window.

"If the contractor's got too many jobs going," says Pendleton, "the workers might only be in your house for two hours when they should have been there all day." One way to guarantee that your job won't stretch to Wagnerian lengths, he says, is to hire a contractor with a lead person or project manager, "a working supervisor who is on the job from beginning to end. That person costs the contractor about $1,000 per week. If the job drags, the contractor has to pay that person for as long as he is there. Then it becomes in the contractor's interest to finish the job." 6. "Your changes are my retirement fund."
Steve Velasco, now a project manager for a Southern California civil engineering firm, once worked as a carpenter on a residential job in which the homeowner, just after the house had been fully framed, pointed to a peak in the roof and casually asked, "Wouldn't a window be nice there?" As Velasco recounts, "The architect told us to go ahead and do it, and suddenly he had spent $10,000 of the homeowner's money."

Why so much? Because making changes midconstruction is the most expensive way to proceed, since work has to be undone and redone to accommodate the new plan. Indeed, Baker has described "while you're at it" as "the four most expensive words in the English language." Architect Richard Hornberger advises that you spend time on the front end devising a plan, then commit yourself to living with it. And if you need to make a change, do it the way architects do it: "Give the contractor a proposal request, in writing," he says. "Then, in writing, you get back a change order that lays out what will be done, how much it will cost and how much additional time it will take."

7. "My best work is on the surface."
Unless you have X-ray vision or the time to spend entire workdays watching your contractors in action, all you may ever know about your job is whether it looks good. Evelyn Yancoskie, director of consumer affairs for Delaware County, Pa., knows of at least one family in her area who got a new roof that, indeed, looked just fine. But the roof was lacking a key element: An ice shield, a three-foot-wide rubber lining that's crucial for a roof in this part of the country. "The contractor figures that nobody will miss it anyway," says Yancoskie. "But if you get a cold winter, any water that gets into the gutters will freeze, back up onto the roof and go underneath the shingles. Without an ice shield, the ice under the shingles melts and leaks into your house."

Other popular ways that contractors can cut corners without your knowing it include skimping on insulation, but packing it in with care so that it looks filled in; leaving out plumbing lines and pumps that give you hot water fast; and using lower-quality wood, but laying it beautifully so that you don't notice. "Guys will use substandard plywood, shingles, siding," says Herr. "In situations where homeowners aren't likely to ask what's going on, contractors use subpar materials." Or just do a subpar job.

8. "I delegate to novices."
Mark Herr recounts the tale of a family that wanted their kitchen redone in time for Easter. One night before the holiday, a subcontractor was sweating to install the garbage disposal. When asked why the job was giving him so much trouble, the worker replied, "When they showed me this morning at Home Depot, I thought I understood." The story points out a big problem: It's not just your contractor you have to worry about, but the subcontractors whom he hires to do the actual work. "You need to know in advance who the subcontractors are," says Herr. "You can't let the contractor sub anything out without your permission."

Mark Levine suggests taking things a step further: Visit homes in which your contractor's carpenter has done the finishing work, and if you like what you see, get it in writing that that particular guy will be hired. "Look to see if there are tight joints in the molding, if cabinets are screwed into the walls rather than nailed, if margins between doors and frames are even all around," advises Levine. "Those are signs of a good finish carpenter, and they serve as a litmus test. A general contractor who has a real pro doing his finish carpentry is probably hiring real pros to do other stuff as well."

9. "If I come knocking on your door, don't answer."
Courtney Yelle was in his Bucks County, Pa., yard raking leaves when a gleaming pickup truck pulled into his driveway. A clean-cut workman emerged and told Yelle that it looked as if his driveway needed to be repaved — which, Yelle admits, was actually true. But before he would commit, Yelle, director of Bucks County Consumer Protection, said he'd need a written estimate along with the worker's phone number and address. The guy said, "Okay. I'll leave it in your mailbox." Then he backed out of the driveway and disappeared forever.

Yelle says that the "worker" who came by his house is better known as a Traveler, a type of scam artist who approaches people's homes offering to do jobs at bargain-basement prices, often on the premise that he has leftover materials from a nearby project. In reality, if he does the job at all, he's doing shoddy work with low-grade materials, says Wendy Weinberg, executive director of the National Association of Consumer Agency Administrators. While it sounds like common sense to be suspicious of solicitors, clearly such con artists can be convincing: Curtis estimates that Travelers bilk Colorado homeowners out of $20 million per year.

10. "I'm bad for the environment."
You have a contractor in your home, replacing those ugly acoustic tiles that have covered the rec room ceiling for 20 years. Early into the job he realizes that the tiles contain asbestos. If he's responsible, he'll insist that the poisonous materials be taken out by a licensed asbestos removal contractor. This will take time and could, ultimately, cost you thousands of dollars. If he's less than honest, he'll ask for an extra few hundred bucks and offer to do the job himself.

Even if the contractor doesn't make a mistake and release particles of cancer-causing dust into the air, he's still breaking the law, and the long-term repercussions are consequential. Contractors who aren't licensed to deal with such materials can't dispose of them at licensed (and safe) facilities, says Ross Edward, a spokesman for the Massachusetts Department of Environmental Protection. And if hazardous materials aren't disposed of properly, they could leach into soil and ground water. Scary, yes, and also illegal: If your contractor gets caught dumping, you may be liable since the pollution came from your property. "These days," says Edward, "the homeowner has just as much responsibility for the environment as any factory owner."