Because new houses cost more now than they ever did before, an increasing number of homeowners who might otherwise be looking for larger or more expensive homes are concentrating instead on expanding or improving their existing living quarters.

While much can be accomplished on a do-it-your-self basis, those contemplating large additions or extensive remodeling projects almost always hire a contractor to do the job.

Although most established contractors are reliable professionals who try to satisfy their customers, too often the homeowner finds that costs tend to climb higher than the original estimate, and in many cases, by the time the job is finished there are serious disagreements and disappointments with the final results.

In extreme cases the parties involved may even sue each other -- in which case the only victors are the lawyers.

To avoid unpleasant experiences, the homeowner who is contemplating a project that will involve hiring a contractor should do two important things: First, make every effort to deal with a well-established professional who has a good reputation locally. Second, make certain that everything is clearly understood by both parties, with all details in writing as part of the contract before any work is begun.

To many homeowners the first step -- finding a reliable contractor -- seems to be the most difficult, because they seldom have occasion to deal with contractorss and thus are at a loss when it comes to finding one who is competent and reliable.

The second step -- getting all the details clearly spelled out in a written agreement -- is in many ways even more important as a means of avoiding arguments and unexpected additional costs. With a bit of forethought and a little extra time spent in discussing the terms of the contract or agreement, misunderstandings can be avoided.

Anyone familiar with the building and home-remodeling business will attest to the fact that there are many cases involving serious disagreements where both parties -- the contractor and the homeowner -- honestly think they are right and that it is the other one who is "trying to get away with something."

For example, a homeowner may hire a reputable contractor to blow insulation into the outside walls of his house, a job that requires drilling sizable holes in the exterior siding. The contractor may stipulate that he will patch all these holes -- but does that mean he will also paint the patched areas if necessary? And does this mean that if he cannot match the paint accurately he will then paint all of the siding to ensure a blemish-free surface?

If the answers to questions such as these are not clearly understood by both parties and put down as part of the agreement, a serious misunderstanding could arise, even if the contractor is otherwise honest and reliable.

The first step is finding a contractor who can do a proper job at a fair price. The best method is through personal recommendation of friends, relatives or others whose judgment you trust, and who have already done business with that person.

Failing this, the homeowner may contact branch offices of various trade associations in this field, such as the National Associations of Home Builders or the local branch of the Home Remodelers Association. Members are usually established business owners in the community and some efforts are made by these associations to police their own members. But just because a contractor does not belong to one of these groups does not mean that he or she should be ruled out -- the firm may still have an excellent reputation and be thoroughly competent.

Another source of information about local contractors is the supply houses from which they buy their materials: lumberyards, building supply houses, paint stores, plumbing supply outlets and the like. These suppliers generally know the reputation of all contractors in the area, and will often recommend specific ones.

Check with more than one dealer to see of the same names come up; sometimes they recommend only their best customers.

Getting a clue to the contractor's credit standing will also be helpful. Generally it is best to stay away from those who have poor credit ratings with their supplers. In this connection, it may help to check with local banks -- especially in smaller towns and local suburban areas -- to see if you can find out about the contractor's credit, or at least his or her reputation in the community.

It also helps to ask the contractor for the names and addresses of local customers, then talk with them and examine the finished job if possible (but be careful that they are not just friends or relatives of the contractor.)

After you have decided on one or more contractors, ask for a written estimate from each, but make sure each is bidding on exactly the same job. This means the same sizes and brand names (where materials of this kind are involved), and the same quality and quantity of both materials and labor. Where applicable, it may also pay to specify colors, because with some materials this can affect the actual cost.

In the case of a paint job, the estimate (and later the contract) should specify the number of coats to be applied on each type of service and what preparatory work, if any, will be completed beforehand.

When insulation is being added, make sure the R rating is specified, as well as the type of material that will be used. If other subcontractors will be required to complete the job (electricians or plumbers, for example), the estimate, and then the final contract, should spell out who will hire and pay them, and who will supply the needed materials, appliances and fixtures. The written agreements should also state who will secure needed permits or licenses, if required, and who will pay any fees involved.

Another important point that should be understood by both parties, and included in any final contract, is the method of payment. And advance deposit by the homeowner is only justified if expensive appliances or other equipment must be specially ordered, and even then this should be no more than the wholesale cost of these items. Subsequent payments can be scheduled on a mutually satisfactory basis, but at least 10 percent should be held back by the homeowner until the job is fully completed and everything has been checked out.

To protect himself, the homeowner should make sure the contractor is covered by insurance -- compensation to cover injuries to workers.

(They could otherwise sue the homeowner if hurt on the premises), and liability to cover damage to property.

The final point to remember is that changes or extras frequently cause arguments and may swell the original price far beyond the original estimate. If possible, the homeowner should avoid making any changes or adding extras, but if these become necessary, a price should be agreed on beforehand.