A home improvement scam is among the most common consumer complaints. Consumers complain about shoddy workmanship, “ﬂy-by-night” contractors who take payments and don’t show up to do the work, and companies that pressure homeowners into expensive, unneeded repairs.Adding a room, renovating a basement, or doing some much-needed repairs? You can save time, money, and frustration by knowing the signs of a home improvement scam.
How can you tell if a contractor might not be reputable? You may not want to do business with someone who:
- Knocks on your door for business or offers you discounts for finding other customers.
- Just happens to have materials left over from a previous job.
- Pressures you for an immediate decision.
- Accepts only cash payments.
- Asks you to pay entire job up front.
- Asks you to get the required building permits.
- Tells you your job will be a “demonstration” or offers a lifetime warranty or long-term guarantee.
- No street address or telephone number, just a post oﬃce box or an answering service.
How to avoid Home Improvement Scams – The best defense against a home improvement scam is information:
Never select the lowest bid.
There’s a reason the bid is low. There may have been something left off, intentionally or unintentionally. There may be a different quality of materials quoted. There may be different warranties, different methods of building, or different sub-contractors performing the work. The lowest bid isn’t the cheapest in the long run!
The signs of the scam: A really low bid that promise more than it will deliver.
The defense: Get 3 bids to insure you pick a contractor with a reasonable price.
Never allow yourself to be forced to make a decision right away.
Anytime a contractor puts pressure on a homeowner to act quickly about making a remodeling decision, that’s a red flag. These decisions should be made carefully, hot hastily.
The signs of the scam: A hurried demeanor and a contractor that wants you to sign a “standard” contract without reading it.
The defense: Tell the contractor that before beginning any home improvement project, you have a rule of checking references and having your attorney read the contract.
Ask for references from everyone that will work on your project.
But references are worthless unless you call them and physically inspect the work. Always ask the reference how the contractor resolved any problems…there are always problems. While you’re checking, check that the contractor has adequate insurance (including worker’s compensation and liability) and that the policies are in force and will cover anyone working on the job site. Verify this! Ask for the name of the insurance agent or company that handles his/her policies. Also check that the contractor’s license is up to date, in force, and that he/she isn’t under review for violating ethics or building codes.
The signs of the scam: A contractor that won’t willingly give you this information is one you should avoid. He may insist that homeowners are the ones that get the permits and that he doesn’t because of the added cost to the job. Hogwash. Move on.
The defense: Check references before you sign anything.
Make sure the contractor is Licensed.
Be sure to ask about the contractors’ license, if required in your area, and verify that the company carries the appropriate bonding and/or insurance.
The signs of the scam: A contractor that won’t willingly give you his license information is one you should avoid.
The defense: Check his licence before you sign anything.
Make sure the contractor performing your home improvement project has credit at local suppliers.
A good business person will have trade credit available to him/her and won’t need you to pay for the materials up front.
The signs of the scam: Look out for home improvement contractors that have material left over from other jobs and want you to pay him/her for them up front. Also, watch out for those who insist that you pay for the materials separately from labor costs. There’s a good chance that this contractor is less than honest in his/her dealing with suppliers and doesn’t keep his/her word. If that’s the case…
The defense: Ask where the contractor plans to buy the materials for the project. Then call the materials dealer and simply ask if this person has a good reputation. You would be amazed at how much information people will give you if you only ask. You can also deduct quite a lot of information from body language and tone of voice. Trust your gut.
Never agree to pay cash up front.
There is a very good chance you will never see the contractor or your money ever again. This is a very simple idea, but it never ceases to amaze me that in the 21st Century, people STILL fall for this and pay a guy in a beat up pickup truck a large amount of cash…and then never see him again.
The signs of the scam: A home improvement contractor that is in such a desperate need of cash that he/she has to get an advance “up front,” is a very poor business person. Don’t, please don’t, do business with anyone that has a cash flow problem.
The defense: Again, references are your best friends. Ask where the contractor banks, ask if he/she would mind if you spoke with their banker about how the contractor’s bank account is managed. If he is suddenly dodgy or gets angry…move on.
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