One suggestion often seen is that you talk to your banker about a construction loan, set up to make "progress payments" - even if you've got the cash in the bank. They can help with making sure everything is done in normal order.

Make sure you get all estimates in writing.

Make sure you have a written contract that spells out exactly what's to be done, how much it will cost, and when and by whom payments are to be made.

Never pay cash up front for the whole job. (An advantage of the construction loan is that the bank can make progress payments based on the contractor showing that he's paid for materials etc. You at least have a witness.)

Before making a final payoff to the contractor, get proof that all bills for materials and/or subcontractors have been paid. The "mechanic's lien" discovered after you've paid the contractor off, in most areas, makes you liable for paying again if the contractor didn't.

Aside from contractors not paying for subcontractors and materials, which of course is why you have a contract, a most common complaint with add-on construction is that it's common for schedules to slip. Most mod contractors work multiple jobs simultaneously, and weather can always intervene. If you have specific schedule requirements make sure they're clear in the contract; but plan your schedule with the expectation that delays may occur. (When you check out the contractors references, whether the work was done on schedule is something you should ask prior customers.)

John