Unlicensed & Uninsured Contractors

Nashville, Tennessee
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Unlicensed & Uninsured Contractors

Noel ColemanPro Member
Investor · Franklin, TN · Member since 2024 · 7 posts · 0 votes

I walked a property today for a flip with a contractor who I really liked and he seemed like he is really knowledgeable. But then learned he's not licensed and insured. Now I'm really torn, but think it just has to kill it for the issues of risk. Any thoughts on this? 

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Noel Coleman:

I walked a property today for a flip with a contractor who I really liked and he seemed like he is really knowledgeable. But then learned he's not licensed and insured. Now I'm really torn, but think it just has to kill it for the issues of risk. Any thoughts on this? 


 Yep kill it. If they will "cut corners" by not getting licensed, how well will the quality of work be? My rule of thumb when walking with contractors is if they talk more about themselves and past projects compared to what they will do on this project thats a hard no. 

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  • Dominic Mazzarella
    Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes
    1y
    Quote from @Noel Coleman:

    I walked a property today for a flip with a contractor who I really liked and he seemed like he is really knowledgeable. But then learned he's not licensed and insured. Now I'm really torn, but think it just has to kill it for the issues of risk. Any thoughts on this? 

    I would say in almost every case, you want them to be licensed and insured. It may cost more but the risk just isn’t worth going with someone uninsured. 
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  • Allan Smith
    Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    1y

    I have some thoughts on this. I got my GC license a couple years ago so I could build houses myself as I was sick of dealing with contractors.

    I've hired plenty of contractors that were not licensed/insured and it went fine. I think there is a common misunderstanding that licensed contractors cost more. Not exactly. Licensed contractors have more of their "shtuff" together and thus are better at their job and naturally will cost more. The license doesn't cost more, the service and quality does.

    And a note on that cost, in my experience hiring contractors, only a small percentage of the cost savings was due to finding the right guy who is willing to work for less. Every time, most of the cost difference was quality. I had an electrician run wires in an attic, telling me up front that the house won't be up to codes, he's only doing the one or two things I asked. Little did I know even on the brand new wires he was running, he was twisting them together with no junction box! This guy wasn't any cheaper. He was more expensive because now I gotta pay someone else to fix it.

    But here's the other side of the license issue. It's very cheap and not difficult to maintain bond/license/insurance. So if this guy doesn't have them, it's a bit surprising. If he's only doing bathroom remodels, that would make sense to not bother. But anyone who considers themselves a GC for hire, it's a bit odd they wouldn't first get their ducks in a row, it's quite easy.

    If it was me, I wouldn't worry about him not being licensed/insured, I would just make sure to vet him. Talk to other clients, go look at his current job site and see how clean it is, the quality of work, if the order of operations is making sense so far, etc.

    PS I'm a GC in the Nashville area and can take on a handful of clients in 2025 if you need me.

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  • Alberto Rivera
    Contractor · Orlando, FL · Member since 2016 · 72 posts · 16 votes
    1y

    Good call, Noel—licensing and insurance are critical, but in Tennessee, a contractor’s license is generally required for projects totaling $25,000 or more, including labor and materials (See Tennessee's licensing requirements). However, smaller projects or certain trades might not require a license. That said, working with an uninsured contractor still carries significant risks. I’d recommend confirming the scope of work and checking with the Tennessee Board for Licensing Contractors to determine if a license is needed for your specific project. Best of luck!

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Noel Coleman:

    I walked a property today for a flip with a contractor who I really liked and he seemed like he is really knowledgeable. But then learned he's not licensed and insured. Now I'm really torn, but think it just has to kill it for the issues of risk. Any thoughts on this? 


     Yep kill it. If they will "cut corners" by not getting licensed, how well will the quality of work be? My rule of thumb when walking with contractors is if they talk more about themselves and past projects compared to what they will do on this project thats a hard no. 

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  • Noel ColemanPro Member
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    Investor · Franklin, TN · Member since 2024 · 7 posts · 0 votes
    1y

    @Alberto Rivera Good to know about the requirement on job size. I didn't know that. 

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    • Alberto Rivera
      Contractor · Orlando, FL · Member since 2016 · 72 posts · 16 votes
      1y

      @Noel Coleman 

      You’re very welcome, Noel! These are all important considerations, and understanding the requirements can save a lot of headaches down the road. As a licensed contractor, I’ve seen how navigating these details can make or break a project. If you ever want to discuss strategies, share experiences, or need additional resources, feel free to reach out. Best of luck with your flip, go make some money!

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  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    1y

    While this is municipality dependent, if the contractor is not licensed you likely cannot obtain the necessary permits and approvals. I know some municipalities allow the property owner to obtain permits but  that in itself is a huge issue in many areas and secondarily insurance is critical in this business. Hiring unlicensed and uninsured contractors is considered  an exclusion under most property insurance policies, meaning you could be giving up that benefit as well.

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