Hiring a contractor is one of the biggest decisions you will make as a homeowner. Get it right and your project comes in on budget, on time, and up to code. Get it wrong and you may find yourself with unfinished work, code violations, voided homeowner's insurance, and no legal recourse because you hired someone who was not properly licensed or insured. This guide is written for Metro Detroit homeowners, with specific Michigan laws, state-level resources, and the red flags that are most common in the Oakland, Wayne, and Macomb County markets.
There is no shortage of contractors in Metro Detroit. There is, however, a significant shortage of contractors who are properly licensed, fully insured, permitted where required, and genuinely accountable when something goes wrong. Knowing how to tell the difference before you sign a contract is the most valuable thing this guide can give you.
Step 1: Verify the Michigan Contractor License Through LARA
Michigan requires residential builders and maintenance and alteration contractors to be licensed through the Department of Licensing and Regulatory Affairs (LARA). The license lookup tool is available for free at the LARA website: michigan.gov/lara.
To verify a contractor's license, navigate to the Professional Licensing section and select Residential Builder or Maintenance and Alteration Contractor depending on the scope of work. Enter the contractor's name or license number and confirm the following:
- The license is active, not expired or suspended
- The name on the license matches the name on the contract and the company paperwork
- The license type covers the work being done (residential builder vs. maintenance and alteration contractor have different scopes)
- There are no disciplinary actions or complaints on record
A legitimate contractor will give you their license number without hesitation. If they cannot produce a license number or become evasive when you ask for it, that is a disqualifying red flag. Do not proceed.
Arise Above Construction holds Michigan License #2101179929, which you can verify directly on the LARA website at any time.
Step 2: Require Proof of Both General Liability and Workers' Compensation Insurance
A license verifies that a contractor has met the state's minimum competency requirements. Insurance is what protects you when something goes wrong on your property. These are two separate things, and you need both.
General liability insurance covers property damage and third-party injury claims arising from the contractor's work. If a crew member accidentally breaks a window, damages a wall, or causes water damage while working in your home, general liability is what pays for it. Without it, you may be filing a claim against your own homeowner's insurance for damage caused by someone else's crew.
Workers' compensation insurance covers medical expenses and lost wages for workers injured on your property. This is the one that catches most homeowners off guard: if an uninsured worker falls off a ladder in your home, you may be personally liable for their medical bills and lost income. Workers' comp is the contractor's responsibility, but if they do not have it and someone is injured, the liability can shift to you as the property owner.
Ask for a Certificate of Insurance before any work begins. The certificate should list your name and address as an additional insured for the duration of the project. Call the insurance company directly to confirm the policy is active if you have any doubt.
Step 3: Get at Least Three Written Estimates
Three estimates is the standard recommendation for a reason. It is not primarily about finding the lowest price. It is about understanding what the actual market rate for your project is, and it reveals a great deal about how contractors operate.
When you collect three estimates, compare them on the same scope. If one contractor is bidding significantly lower than the others, ask what is different about their scope. Are they using lower-grade materials? Skipping a step that the other two included? Planning to use unlicensed subcontractors? A low number that cannot be explained by a clear difference in approach is usually a low number that will grow once work begins.
Also compare what the estimates include in writing. A professional estimate should specify materials by product or grade, the timeline, what is included and what is excluded, the payment schedule, and warranty terms. A one-page quote with a single number and no detail is not a professional estimate. It is a placeholder that leaves every important question unanswered.
Michigan's 1/3 Deposit Limit: Know Your Rights
Michigan law limits the deposit a residential contractor can require before work begins. Under the Michigan Residential Construction Lien Act and related consumer protection statutes, a contractor may not require a deposit of more than one-third of the total contract price for residential construction projects. This is a hard legal limit, not a guideline.
If a contractor demands 40, 50, or 60 percent upfront, they are violating Michigan law. Do not pay it. A demand for a large upfront payment before any work has been completed is one of the most reliable indicators that a contractor either has cash flow problems, is not planning to complete the job, or is operating outside the law. Legitimate contractors do not need more than the legal deposit limit to get your project started.
The standard payment structure for a well-run contractor in Metro Detroit looks something like this: one-third at contract signing, one-third at a defined project milestone (such as rough-in completion), and the final one-third upon completion and your walk-through sign-off. Any contractor who pushes back hard on this structure deserves your scrutiny.
Red Flags: Six Things That Should Stop You from Signing
Metro Detroit has a significant number of legitimate, licensed, insured contractors. It also has a number of operators who will take your deposit and disappear, do work that does not pass inspection, or leave you with problems that cost more to fix than the original project. Here are the six red flags that should stop any conversation:
- No written contract. A contractor who works only on a handshake is a contractor you have no recourse against. Everything must be in writing: scope, materials, timeline, payment schedule, and what happens if something changes.
- No permits pulled. If a project requires a building permit in Michigan and the contractor tells you permits are not necessary, or asks you to pull the permit yourself so they can do unpermitted work, walk away. Unpermitted work can affect your homeowner's insurance, your ability to sell the home, and your safety.
- Demands more than one-third upfront. As covered above, this violates Michigan law and is a strong indicator of financial or ethical problems.
- No license number on paperwork. Licensed Michigan contractors are required to include their license number on contracts and advertisements. A contractor who cannot or will not produce a license number should not be working on your home.
- Vague scope of work. A contract that says "kitchen remodel per discussion" with no specifications is a blank check you are handing to someone else. Every item of work, every material, and every allowance should be spelled out.
- Unlicensed subcontractors. The general contractor's license covers their work. If they use subs for electrical, plumbing, or HVAC, those subs need their own appropriate Michigan licenses. Ask who will be on site and verify their licenses too.
What a Good Written Contract Must Include
Once you have selected a contractor, the contract is what protects both parties. A professionally prepared residential construction contract in Michigan should include:
- Full legal names and addresses of both parties, plus the contractor's Michigan license number
- A detailed scope of work with materials specified by brand or grade wherever possible
- The start date and estimated completion date, with provisions for delays
- A payment schedule tied to project milestones, not arbitrary dates
- A change order process that requires written approval and pricing before any scope changes are executed
- A lien waiver clause ensuring the contractor waives mechanic's lien rights upon final payment
- Warranty terms for both labor and materials
- A process for dispute resolution
If a contractor provides you with a contract that is missing several of these elements, it is appropriate to request that they be added before you sign. A professional contractor will accommodate this without resistance.
What MBE Certification Means and Why It Matters
Minority Business Enterprise (MBE) certification is issued by recognized certifying bodies and confirms that a business is at least 51 percent owned, operated, and controlled by individuals from a minority group. In Michigan, MBE certification can open access to specific government and municipal contract opportunities, and it is a meaningful credential for homeowners who want to direct their renovation dollars to businesses that reflect the diversity of Metro Detroit.
For 203K projects and federally connected renovations, working with an MBE-certified contractor can also be relevant to some program preferences. Arise Above Construction is fully licensed (License #2101179929) and fully insured, and we carry a 5.0-star rating across more than 57 verified Google reviews from homeowners across Oakland, Wayne, and Macomb Counties.
Frequently Asked Questions
What if a contractor says they do not need a license for my project?
In Michigan, most residential construction work above a relatively low dollar threshold requires a licensed contractor. Some very minor maintenance work is exempt, but any project that involves structural work, electrical, plumbing, HVAC, or significant cosmetic renovation should be done by a licensed contractor. If someone is telling you their work is exempt, verify that independently through LARA before agreeing to anything.
Can I require the contractor to use specific brands or products?
Yes, and you should whenever it matters to you. A professional contractor will either agree to use specified materials or give you a clear reason why they prefer an alternative and let you decide. Specifying materials by brand and grade in the contract protects you against material substitution after signing.
What should I do if a contractor asks me to pay cash to avoid taxes?
Do not do it. This request signals that the contractor is operating outside of normal business practices, which also likely means they are cutting other corners. It also leaves you with no payment record if a dispute arises. Pay by check or credit card and keep all receipts.
How do I find contractors in Metro Detroit who specialize in my type of project?
Start with LARA's license lookup to confirm a candidate is licensed, then look at verified Google or Houzz reviews for your specific project type. Ask specifically whether the contractor has completed projects like yours in the past year and request references from those jobs. A contractor who specializes in kitchen remodels but has never done a basement waterproofing job should tell you that, and a good one will refer you elsewhere rather than take a job outside their expertise.