Don't feel bad. Unless you've helped build three or four homes and were the general contractor for another one, you aren't an expert in home improvement, and you don't need to be an expert, because you can hire someone else who is: a general contractor.
Step 1: Before You Start Looking
First, you are an expert in your budget. You, and only you, know how much money you have saved up. You, and only you, know your income. You know how many debts you have, you know what your expenses are, you know everything there is to know about your money. If you don't, go and get started on debt counseling, because you are probably already several thousand in the hole and have no business hiring a contractor.
The nice thing about money is it allows you to buy someone else's expertise for your project. You know what you like, but don't have the skill to bring it off, so your expertise in your money allows you to hire someone else's expertise to fulfill your desires.
Which brings us to your second area of expertise: your desires. You are an expert in your likes and dislikes. You many not be able to describe it, but when you see something, you'll be able to say, "Yes, that one! That's the one I want!"
Expertise in your desires is one way of saying you are willing to make decisions. If you are one of the many, many people (like me) who get overwhelmed trying to pick out cereal in the grocery store, then you may have problems making decisions. (Don't worry, I do too: there's just so many choices!) The important thing is that you make a decision in a relatively short frame of time, (For cereal, say, five minutes, for home improvement, say, a week or two.) If you can't make decisions, you won't be able to make vital home improvement decisions, and worse, you may make a decision and change your mind later. The contractor will not be too pleased if you tell him, "Can you change the color of the cabinets?" after he's already installed your counter, hooked up the plumbing, and was about to finish off the contract. Decision making is very important, because, as we see later, not making decisions becomes very, very expensive. Become an expert in your desires, and when you do, that's when you go hire a contractor.
Now, let's use your money expertise and your expertise in your desires to do two things as prep work.
First, decide what needs to be done. Keep this rather general- something on the order of "I want to redo the kitchen" or "I want a new countertop." Keep in mind that you know nothing about home improvement, so you won't be able to make very good guesses about how complicated a project actually is. You are defining what you want as a final result, and this is where you're expertise in your desires comes into its own. If your tiny sink has been irritating you for years, you know you'll want a bigger sink, which probably involve a new counter and at least some cabinetry work....but you don't need to know that. All you need to know is that the sink is bugging you and you want it gone. It's ok if you don't know what you want the final result to look like...that's why you're hiring a contractor, to help you with the design process and installation. "I want to redo the sink" is a perfectly good place to start.
Second, work out your budget. You have no idea how much home improvement actually costs, and unless you want to spend ten years in the carpentry trade, you never will. However, you are the world's best expert in how much you can afford to pay. Sit down and calculate how much you want to spend. Make this a fairly tight figure- whether your budget is $500, $5000 dollars, or $50,000, figure out the most you are willing to spend (or more importantly, can afford to spend) and stick with it. This has the great advantage of proofing you against falling for slick sales pitches where you end up going into debt because they convinced you that you absolutely needed the most expensive version of your home-improvement project, and it will also help you enormously in finding the right contractor.
A note on budget: pay cash. Don't take out a loan to do home improvement. If you do, you won't enjoy your home improvement, because every time you look at it, you will be reminded about how much you still have to pay for it. You will never rest easy with your improvement until you own it free and clear. If you don't have the money, don't buy it.
Step 2: Hiring the Contractor
"I have a budget of $10,000 dollars, and I want to redo my kitchen."
This order is very important, and I'll tell you why. A lot of people walk into a remodeling office and say "I want to redo my kitchen." The first thing that will pop into the contractor's mind is, "Well, how much money do you have?".
They won't say that out loud, because it comes across as greedy and they might scare away a potential customer. So the contractor will take a look at your clothes and use that to guess about how rich you are, and then take you on a tour of the most expensive kitchen sets they think you can afford. After and hour or two, based your reactions, they'll get a good idea of how much money you're willing to spend.
That hour or two is an enormous waste of time. Here's why. In a home improvement store like Lowes, there is an aisle devoted entirely to doorknobs. There are over a hundred doorknobs, from cheap brass doorknobs to sliver-washed doorknobs to gold-plated doorknobs. You have hundreds of options just for a doorknob. Your home improvement project has hundreds of parts with hundreds of options, and you can get overwhelmed with the wealth of choices you have. However, when you have a budget, your choices get narrowed down dramatically to just the ones you can actually afford.
So when you walk into a remodeling showroom, and tell a remodeler your budget right away, they'll know exactly what you can afford. They'll spend the rest of their time showing you all the options that are possible in your budget. Instead of wasting time guessing at what options you have, they can spend time figuring out which of your options your heart truly desires.
After you've told the contractor your budget, and you've had a good time looking over things and getting a feel for what you want, it is time to go to the next step: seeing if you can work with the guy (or gal, as the case may be.) You'll hear your remodeler say they'll give you a free quote on the job. What they mean is they'll do all the design work- and make no mistake, good design takes a lot lot of work- for free. The reason they do it for free is because they can't tell you how much a job will cost without knowing every last widget that goes into it. The other very important reason is that the design phase gives you and the contractor a way to feel eachother out, to see if you can live with eachother.
And make no mistake, you are living with eachother. You are going to be rubbing elbows with this guy for the next few weeks or perhaps months, depending on the project. You'll want to make sure you can stand him, and, if you want him to do a good job, you'll want to make sure he can stand you.
Your relationship with the contractor is your most vital indicator about whether this contractor is a good fit for you and your project. Depending on the size of the contract, your project will require the skills of many people. For example, remodeling a kitchen requires someone to install cabinets, a plumber to hook up the sink and dishwasher, an electrician to move outlets and hook up the refrigerator, lighting experts, flooring experts, painters...just remodeling a kitchen might involve the skills of over a dozen subcontractors. It is not your job to try and manage these subcontractors- that is the job of a general contractor, and indeed, that's often why they are called a general contractor- not because they know how to do everything, but because they are good at organizing and managing the people who can.
Your best indicator for how good a general contractor is at managing other people is how good they are at managing you. Here are a couple of things to look for. If they're timely in their appointments with you, they'll probably be good at being on time on the job and at making sure other subcontractors are informed of when they need to be there to do their job. If they are polite and firm with you, they will be polite and firm with their subcontractors. If they seems organized at your meetings- meaning they has all of their supplies, and papers around- they will be organized on the job. If they are good at getting you to make essential decisions, then they'll be good at getting contractors to be there when they need to be there.
Occasionally you will run into remodelers who are gruff, impolite, and disorganized, but make excellent cabinetry or sinks or whatever it is they do. You don't want to hire them as general contractors. Hire them if the job only requires one person, because they are good at working alone. Don't hire them if it requires more than one person, because if they are bad at working with you, odds are they will be bad at working with everyone else.
If you pay attention to all of this during the design phase, and you will have a good idea of whether this contractor is the contractor for you.
During this design phase, you and the contractor will spend several hours going over every last bit of your project and drawing up a specification. Depending on the project, you can spend 10-12 hours talking with the contractor, and he'll spend an additional 20-30 hours designing everything and drawing up the specification. Once you have this all hammered out, that specification will become your contract.
One of the marks of a good contractor is if they can write a good contract. This contract is anywhere from 300-400 words to three pages long, and it will include all of the basic details that the builder needs to know in order to build your project- the materials used, the measurements, and everything that you agreed on in the design. A good contractor will read through all of these and make sure you understand every bit of it- and when your eyes start to glaze over because you are reading a contract, a good contractor find out where you were confused and explain it to you so that you clearly understand what you are signing. If 300-400 words seems a bit short for a contract, this is because you are dealing with remodelers, not lawyers. They like everything as clear as possible so that the work can get done.
Once you've agreed on everything that is to be built, the contractor will add one final paragraph to the contract. This paragraph will state that any changes you make after the contract is signed will cost you. Some contractors charge $150 dollars to make any change, however minor, in addition to charging for materials and labor to make the change. This is because is becomes very expensive and very frustrating to change the design of something that is half-built. Changing a plan is easy. Tearing down a wall because the customer wants the window a half-inch to the left is hard.
Once the specification is done, the contractor can give you a solid bid on the project - in other words, they can tell you about how much it will cost. They won't be able to tell you exactly what it costs, because at certain points at the project you will need to decide thongs like type of carpet, style of hanging light, or color of paint, and the cost will depend on what you choose. Those items will be estimates- or more specifically, in the contact, there will be an allowance made in the contract for what the budget for that particular item is. If you go over that allowance, the contractor will charge you more, and if you go cheaper, the contractor should give you a discount. Once you have all this sorted out, the contractor will include a date when he plans to start work.
The contract will also specify how much is paid when. Contracts for projects generally have an upfront cost, a few milestone costs, and a completion cost. For example, if you are building an addition, you could pay third of the cost of the project as a down payment, pay the next third when the addition is put up and the walls are installed, and pay the final third at the end of the project.
You now have a contract. At this point, you must make a decision about whether you are going to do the project or not. The bid is free- you can walk away with no money spent. As soon as you sign on the dotted line, you are obligated to pay what the contract says if the contractor delivers on their part of the contract.
Now- if you like the design, but decide you don't think you can work with the contractor, you can probably take the plan and go find another contractor- but it's going to cost you. The contractor will very likely not let you have the design plan they made unless you sign the contract with them (meaning they get to build it) or you pay them for their design work.
Keep in mind that a good remodeler costs about $40-$50 per hour, and they just spent 40 hours or more on your project. Therefore if you want the design, expect to pay somewhere around $1500-$2,000 for it.
Step 3: The Work
Somewhere along the line, you are probably going to want to make a tiny little change, like moving the window over an inch. Keep in mind that you really have to want to make that change, because it is going to be expensive. Also, if make as few changes to the plan as possible, because one thing that really frustrates contractors is to to the job and then have to tear apart what they just did so they can do it over again.
As the contractor hits the milestones in his contract, he's going to want to get paid. Make sure you have the money to pay the bill when it comes.
Finally, after weeks or months, the work will be done. Woohoo! Pay the final payment, and enjoy your lovely new home improvement!