NEW YORK (CNN/Money) - Dreaming of adding a master suite or converting your basement into an entertainment center, but worried that you could lose your shirt? Well, you're not alone.

For many consumers, home renovation turns into a headache with construction delays, spiraling costs, even shoddy workmanship.

But it doesn't have to be that way. There are many excellent contractors out there. Here are today's five tips for finding them and managing your project.

There are plenty of Web sites that can connect you with contractors in your area.

CNNfn's Gerri Willis shares tips on how homeowners can prevent problems with work done on your house. Play video (Real or Windows Media)

• www.Handymanonline.com is a referral service that lists contractors who are legitimately licensed and carry liability insurance.
• www.Angieslist.com provides customer reviews of contractors in several Midwestern cities.
• You'll also want to point your browser to www.nari.org and www.nahb.org to find licensed contractors.

Another great way to get names of general contractors? Interview neighbors about their renovation projects for suggestions of whom to hire and whom to stay away from.

Once you've come up with some names of potential contractors, you'll want to interview them.

Insist on seeing work they've done on someone else's nickel. If your candidate is late for your meeting, move on. In home renovations, punctuality is important.

Also, make sure the contractor you're interviewing has been in business a number of years under the same name. Rogue contractors go in and out of business, changing their names to stay a step ahead of regulators. Ask for estimates of cost of the work and any materials and fixtures.

Don't necessarily go with the cheapest contractor, either. Consumer advocates say a low-ball price can indicate a scam artist. Remember, many of the costs a contractor faces are fixed, so a price that's wildly below average is probably too good to be true.

Even if you get a great general contractor -- that's the person that manages the various trades people needed to complete a major project -- you can still get stuck with novice carpenters or plumbers. Again, see their work first hand.

Visit homes in which your contractor's carpenter has done finishing work and if like what you see, get it in writing that a particular subcontractor will be hired.

Most contractors will want you to sign a boilerplate agreement based on one developed by the American Institute of Architects. It lays out the job details, including the payment schedule.

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Some states limit down payments to 10 percent of the project cost or $1,000, whichever is less. But if you don't live in one of those states, don't let your payments get ahead of the work. Plan on 10 percent down, 25 percent when the plumbing and electrical work is done, 25 percent after cabinets and windows and 25 percent for flooring and painting, and the rest at the end.

Another good option? Put the payment in an escrow account controlled by a third party. Payment requires the signatures of both the contractor and the owner to release money.

Home remodeling is a growth business and if you want the full attention of your contractor, you'll have to compete for it. Be the squeaky wheel with your contractor -- set up formalized meetings that you hold in person or on the phone and assign one family decision maker to talk to the contractor, not a site supervisor.

Ask for work schedules so that you can determine whether the contractor is meeting his or her own deadlines.  

Gerri Willis is the personal finance editor for CNN Business News. Willis also is co-host of CNNfn's The FlipSide, weekdays from 11 a.m. to 12:30 p.m. (ET). E-mail comments to 5tips@cnnfn.com.