Prices that seem too good to be true usually are  too good. Some "great deals" will involve low-quality work or substandard materials. Some low bidders plan to make up profits on inevitable change orders.  

Do not buy from an unknown company selling door  to door. In some communities door-to-door sales people must obtain a license to  solicit. Ask to see this license if you live in a community that requires a  license. If the soliciting person is violating local laws before
they knock on  your door, does that not give you a feel for their ability to exceed building  code standards.

Resist the high-pressure sales technique. "Act now" offers are rarely that limited in a remodel project. 

Avoid moonlighters - their work may not be  quality. In some cases, the goods and materials they are using may be stolen  from their employer or another source. They also may not be properly licensed or  have proper insurance. You also may find that the moonlighter will not be able  to complete your project in a timely manner if there are delays or
mistakes.  

A sign in your neighbor's yard during a project  does not mean that your neighbor will be happy with the result and
recommends  the contractor.

A referral may not be worth much if the person judging does not have a good ability to critique. Even bad companies can have a good job. A good company can have a bad job on a bad day. 

Check references and other sources. The BBB is a  start but it is only a start. Check the Secretary of State to see if the
  contractor is incorporated. If the business is using a trade name (which is filed with the county), confirm it with the county and specify the legal name in  the contract. Find the county of their registered agent and principal
office.  Check the legal records for the courts in those counties (both the individual  and the corporation) - many court files are now online. Check the state license  (if one is required). Check counties where the contractor works
to see if owners  have sued or been sued. 

Avoid price comparisons that are "apples to oranges." A good scope of work helps. If you are certain that your bids include a clear scope including specifying the same quality and grade of product, it will help you. If one remodel bid includes high end appliances and the other just indicates an unindentifed appliance brand, you may find that the price 
comparison is like comparing a Ferrari to a Yugo and should not be surprised that there is a price difference. 
 
A good contractor will have a good contract.  Contracts are the legal documents that give you you the clear rights.and 
remedies. A good contract details the specifications of the project. Handshake deals are basically costly battles waiting to be fought. Remember when you go to  court on a "handshake deal" its your word against the contractors and you should  not be surprise to see how much your memory disagrees with what the other side  believes. 

Avoid large up-front payments. But some additional  deposits are reasonable if required by a contractor when items are special  ordered or non-refundable. If possible, use credit card to make payments so that  you may avail yourself of additional legal protection. 

Avoid cash payments.
 
Consider lien releases on major projects.

A contractor who claims to be "licensed" and is referring to a county issued occupational tax license is NOT truly state 
licensed. An occupational tax license issued by a county is merely a filing for purposes of paying a tax. It does not represent a certification. All businesses must have a county tax license or "business license." A contractor who does 
suggests that an occupational tax license is a state license or arises from a testing or certification is a definite red flag. 

Never sign a contract with blanks.