The market’s tight, so do your homework before hiring a contractor

These are tough times in which to hunt for a good contractor to repair or spiff up your home. Mortgage rates are still low, so homes are still being bought at a good clip. And new homeowners, along with existing homeowners, frequently need or want work done on their abodes.

If you look in the Yellow Pages for a contractor, you might regret it (though you could be lucky, of course). Good contractors generally don’t need to advertise – their services tend to be in great demand, and they’re often overextended. A better way to go about it is to ask around and collect names of recommended contractors. Keep an eye out for neighbors having work done, or houses you pass by that are getting impressive facelifts.

Once you find some contenders, here are a few more tips:

• Check them out. See whether they have any marks against them with the Better Business Bureau, and check your local courthouse, too, to see whether they’ve been involved in any lawsuits.

• Check their references and go look at some jobs they’ve done. Get some older references, too, so you can learn how well their work held up over time.

• Check their licenses and insurance. Make sure nothing has expired. The www.contractors-license.org Web site may help you.

• Get several estimates for your job, and ask that they be detailed and itemized, including materials, so that you can compare them easily. You shouldn’t necessarily go with the lowest bid, but the range of prices you get will help you decide.

• Get your contract in writing, and keep records of everything, in case something goes wrong.

Contractors doing any of the following may want to rip you off, so be careful: soliciting business door-to-door, demanding only cash payments, offering unusually long guarantees, requiring payment in full at the outset, pressuring you to decide on the spot, offering to help you borrow money.

Learn much more about dealing with contractors at www.ftc.gov/bcp/conline/pubs/services/homeimpv.htm and at www.fool.com/homecenter, which also features tips on buying or refinancing a home.

Ask the Fool

Q: Is there a way for teens to learn about investing with other teens? – S.F., New Orleans

A: Indeed there is – teens can form investment clubs. It’s true that minors can’t trade stock on their own, but teens banding together can still learn together and can set up a pretend portfolio on their own.

Once they find and research companies they want to own, they can do so individually, with a parent acting as custodian of their account. Teens (and adults) can learn more about investment clubs at www.better-investing.org, or call the National Association of Investors Corp. at 877-ASK-NAIC (that’s 877-275-6242).

Investment clubs are terrific for adults, too – whether beginning investors or seasoned pros. Clubs can help you develop investing discipline, and you can share the workload and insights with club-mates.

Grab your 15 minutes of fame and ask a financial question of Fool co-founders David and Tom Gardner on The Motley Fool Radio Show on National Public Radio. Call anytime toll-free at 866-NPR-FOOL.

My smartest investment

Back in the late ‘70s or early ‘80s, I purchased 25 shares of Texaco for $750. The salesman said the commission was too high for 25 shares. I told him I was not going to sell them tomorrow. Well, it was one of my smartest investments, as I now have 163 shares of ChevronTexaco and each quarter’s dividend gives me about 1 1/2 shares more for a total of six more shares a year. That definitely was one of my smartest investments. – Ned Pitcher, Rome, N.Y.

The Fool Responds: Those shares are worth more than $15,000 today, and after having spent $750 on the shares initially, you’re receiving more than $500 per year in dividends. Your broker was right to have you think about the cost of the commission – it makes little sense to pay, say, $25 to buy $100 worth of stock, as you’re immediately down 25 percent. But many brokerages today charge low commissions (learn more at www.broker.fool.com).

By keeping your commission costs to no more than 2 percent of your trade’s value, you can minimize their effect. (Example: a $20 commission on a $1,000 stock purchase.)