Red Flags: How to Spot an Unlicensed Contractor Before It's Too Late | Expert Guide

Every year, thousands of California homeowners fall victim to unlicensed contractors who leave behind unfinished projects, substandard work, and empty bank accounts. The California Contractors State License Board estimates that unlicensed contracting costs consumers hundreds of millions of dollars annually. Learning to spot the warning signs can save you from becoming another statistic.

Why Unlicensed Contractors Are Dangerous

Before diving into red flags, let's understand what's at stake when you hire someone without a license:

No bond protection. Licensed contractors maintain a $25,000 surety bond. If they fail to complete work or violate the contract, you can file a claim. Unlicensed operators have no bond — there's nothing to claim against.

No workers' comp. If an unlicensed worker is injured on your property, you may be personally liable for their medical bills, lost wages, and disability. This can easily reach six or seven figures.

No CSLB recourse. The CSLB's complaint, investigation, and mediation process is only available for disputes with licensed contractors. With an unlicensed operator, your only option is the courts.

No permit authority. Unlicensed individuals cannot legally pull building permits. Work done without permits can result in fines, required demolition, insurance voidance, and problems selling your home.

No contract enforcement. In California, unlicensed contractors cannot enforce their contracts in court. While this might sound like it benefits you, it creates a lawless situation where neither party has legal protections.

Criminal penalties for them — but that doesn't help you. Contracting without a license is a misdemeanor punishable by fines and jail time. But criminal penalties don't get your money back or fix your kitchen.

The Red Flags

🚩 Red Flag #1: No License Number Provided

The most obvious warning sign. If you ask for a license number and get:

"I'm between licenses right now"
"I don't need one for this type of work" (for work clearly over $500)
"I'm working under someone else's license" (illegal in most cases)
An evasive or changing-the-subject response

Run. Every legitimate California contractor has a license number and is proud to provide it.

🚩 Red Flag #2: Cash Only, No Contract

Unlicensed operators avoid paper trails. If someone insists on:

Cash-only payments
No written contract or estimate
Making checks out to an individual rather than a business
Venmo/Zelle only with no receipts

These are strong indicators of unlicensed, uninsured, and likely unreported work.

🚩 Red Flag #3: Unsolicited Door Knocking

A "contractor" shows up uninvited saying they noticed your roof needs work, or they have leftover materials from a nearby job and can give you a great deal. This is one of the oldest scams in the book. Legitimate contractors don't cold-call by knocking on doors.

🚩 Red Flag #4: No Physical Business Address

Check for:

Only a cell phone number — no landline or office
Only a PO Box — no physical business location
No website or social media presence
No business cards, or hand-written business cards
A vehicle with no company name, license number, or professional markings

Legitimate contractors invest in their business infrastructure because they plan to be around long-term.

🚩 Red Flag #5: Way Too Cheap

If one bid is 40-50% below the others, something is wrong. Common explanations:

No insurance overhead (because they have none)
No permit costs (because they won't pull any)
No workers' comp costs (because workers are paid under the table)
Planning to use substandard materials
Planning to abandon the project partway through

The old saying applies: if it seems too good to be true, it is.

🚩 Red Flag #6: Demands Large Upfront Payment

California law limits deposits to 10% of the contract price or $1,000, whichever is less. If someone demands:

50% upfront
"Materials cost" upfront (without itemization)
Full payment before starting
Payment before the contract is signed

This violates California law and strongly suggests the person is either unlicensed or planning to take your money and disappear.

🚩 Red Flag #7: "You Don't Need a Permit"

For any significant work — structural changes, electrical, plumbing, HVAC, roofing, additions — permits are required. If a contractor says:

"This doesn't need a permit"
"Permits just add cost and slow things down"
"I know the inspector — we don't need to bother"
"You pull the permit and I'll do the work"

They're likely unlicensed (and thus unable to pull permits) or trying to avoid the code compliance process. Either way, walk away.

🚩 Red Flag #8: No Insurance Documentation

When you ask for proof of insurance and get:

"I'm insured, trust me"
Photocopied or blurry certificates
Expired certificates
Refusal to provide documentation
"My insurance is being renewed"

Always verify insurance directly with the insurance company, not just a certificate the contractor provides.

🚩 Red Flag #9: Pressure to Sign Immediately

"This price is only good today" is a high-pressure sales tactic used by scammers and fly-by-night operators. Legitimate contractors understand that homeowners need time to compare bids, check references, and verify licenses. Anyone who pressures you to commit immediately is hiding something.

🚩 Red Flag #10: No References or Fake References

Warning signs with references:

"I don't have any references" (how is that possible if they're experienced?)
References who can't describe the project in detail
References who all have the same area code as the contractor (potential friends/family)
Contractor gets visibly uncomfortable when asked for references

🚩 Red Flag #11: Vague or Verbal-Only Estimates

Professional contractors provide detailed, written estimates that itemize:

Labor costs
Material costs (with specific products named)
Permit fees
Timeline
Payment schedule
Warranty terms

If you're getting napkin-math estimates or "it'll be about five grand, give or take," that's not a professional operation.

🚩 Red Flag #12: They Found You Through Unusual Channels

Be cautious of contractors you find through:

Craigslist ads with no license information
Flyers stuck to your mailbox
Handwritten signs at intersections
Door-to-door solicitation
Facebook Marketplace

While some legitimate contractors advertise through these channels, they're also heavily used by unlicensed operators. Always verify licensing regardless of how you found the contractor.

How to Verify

It takes less than 5 minutes: 1. Go to cslb.ca.gov 2. Enter the license number (or search by name) 3. Confirm: Active status, correct classification, current bond, insurance on file

Or search for contractors on Sacramento Valley Contractors — we display CSLB verification data with easy-to-understand badges on every profile.

What to Do If You've Already Hired an Unlicensed Contractor

If you discover mid-project that your contractor is unlicensed: 1. Stop making payments immediately 2. Document everything — photos, communications, payments made 3. File a complaint with the CSLB — report unlicensed activity 4. Contact your local District Attorney's consumer protection office 5. Consult an attorney — you may have legal remedies 6. Get a licensed contractor to assess and complete the work

Remember: unlicensed contractors cannot enforce their contracts in California court. This means they cannot sue you for non-payment. However, you should still seek legal advice about your specific situation.

The Bottom Line

Your home is likely your largest investment. Don't trust it to someone who can't even be bothered to get licensed. The warning signs are clear if you know what to look for — no license number, cash only, no contract, too-good-to-be-true pricing, pressure to commit, and avoidance of permits.

Take the extra time to verify. It's free, it's easy, and it could save you tens of thousands of dollars and months of stress.