Many homeowners choose unlicensed contractors to work on their homes, for various reasons. Some do it to save money. Unlicensed contractors pay no licensing, insurance, bond, taxes or workman’s compensation. Some just don’t know the difference, or how to check.
If you do choose an unlicensed contractor, you have very little recourse if things don’t go according to plan. If the contractor gets hurt on the job, they can sue your homeowner’s insurance, or you, personally. If they accidentally damage your property, say they cut into a pipe and flood your kitchen, you have no ability to sue their bond or insurance.
Washington state has some very useful resources for homeowners. There are guidelines for hiring contractors, how to check on their backgrounds, and what to do if things go wrong. Here is a link to Washington State’s Labor and Industries website
Most states have similar websites with the ability to check out contractors, so if a contractor says he has doe business in another state, you can check that, too. For example, here is a ink to Virginia’s site