The Top 5 Contractor Scams and How to Avoid Them
Article From HouseLogic.com
By: Oliver Marks
Published: January 07, 2010
The best way to protect yourself against unscrupulous contractors is to be alert to the warning signs of these common home-improvement scams.
Crooks go where the money is. So with Americans spending as much as $22 billion a year on construction projects, it’s no surprise that home improvement has become a favorite target for fraud artists. Some of these shady characters use amazingly well-polished hoaxes that are tricky to spot until it’s too late.
The vast majority of contractors are honest, hardworking professionals. Protecting yourself against the few bad apples requires checking references (http://www.houselogic.com/articles/five-essential-questions-ask-before-hiring-contractor/), having a solid contract (http://www.houselogic.com/articles/what-remodeling-contract-should-say/), and being alert to the warning signs of these top five contractor scams.
Scam 1: I need the money up front
This is the most common ruse reported to the Better Business Bureau, says Erin Dufner, vice president of the organization’s Austin, Texas, office. Your contractor explains that because he has to order materials and rent earthmoving equipment to get the job started, he needs, say, 30% to 50% of the project price up front. Once you’ve forked over the dough, one of two things happens: He disappears on you, or he starts doing slapdash work knowing that you can’t really fire him because he’s sitting on thousands of your dollars.
How to protect yourself: Never prepay more than $1,000 or 10% of the job total, whichever is less. That’s the legal maximum in some states, and enough to establish that you’re a serious customer so the contractor can work you into his schedule–the only valid purpose of an advance payment. As to the materials and backhoe rentals, if he’s a professional in good standing, his suppliers will provide them on credit.
Scam 2: Take my word for it
When you first meet with the contractor, he’s very agreeable about doing everything exactly to your specifications and even suggests his own extra touches and upgrades. Some of the details don’t make it into the contract, but you figure it doesn’t matter because you had such a clear verbal understanding. Pretty soon, though, you notice that the extras you’d discussed aren’t being built. When you confront the contractor, he tells you that he didn’t include those features in his price, so you’ll have to live without them or pony up additional money to redo the work.
How to protect yourself: Unfortunately, you have no legal recourse because you signed a contract that didn’t include all the details. Next time, make sure everything you’ve agreed on is written into the project description. Add any items that are missing, put your initials next to each addition, and have the contractor initial it, too–all before you sign.
Scam 3: I don’t need to pull a permit
You’re legally required to get a building permit for any significant construction project. That allows building officials to visit the site periodically to confirm that the work meets safety codes. On small interior jobs, an unlicensed contractor may try to skirt the rule by telling you that authorities won’t notice. On large jobs that can’t be hidden, the contractor may try another strategy and ask you to apply for a homeowner’s permit, an option available to do-it-yourselfers.
But taking out your own permit for a contractor job means lying to authorities about who’s doing the work. And it makes you responsible for monitoring all the inspections, explaining to the contractor what changes the inspector wants, and getting him to make them–since the contractor doesn’t answer to the inspector, you do.
How to protect yourself: Always demand that the contractor get a building permit. Yes, it informs the local tax assessor about your upgrade, but it weeds out unlicensed contractors and gives you the added protection of an independent assessment of the work, says Tampa, Florida, attorney George Meyer, chair-elect of the American Bar Association’s Forum on the Construction Industry.
Scam 4: We ran into unforeseen problems
The job is already under way, perhaps even complete, when this one hits. Suddenly your contractor informs you that the agreed-upon price has skyrocketed. He blames the discovery of structural problems, like a missing beam or termite damage, or design changes that you made after the job began.
The additional fees might very well be legit, but some unscrupulous contractors bid jobs low to get the work and then find excuses to jack up the price later. If you’re unsure whether your contractor is telling the truth about structural problems, you can get an impartial opinion from a home inspector (http://www.nabie.org), the local branch of the National Association of Home Builders (http://www.nahb.org), or even your local building department.
How to protect yourself: Before signing the contract, make sure it includes a procedure for change orders, which are mini-contracts containing a work description and a fixed price, for anything that gets added to the job in progress. The extra work, whether it’s related to unforeseen building issues or homeowner whims, can proceed only after the change order is signed by both homeowner and contractor.
Scam 5: I’ve got extra materials I can sell you cheap
This hoax is usually run by driveway paving companies, whose materials–hot-top asphalt and concrete–can’t be returned to the supplier. So the crew pulls up to your house with a load of leftover product and quotes a great price to resurface your driveway on the spot. Even assuming they really are giving you a bargain (by no means a sure thing), taking them up on the offer is risky. You have no idea who they are or whether they’ll do the job right. And if the driveway starts cracking next year, you can be sure that you won’t be able to find this bunch again.
How to protect yourself: Never hire a contractor on the spot, whether it’s a driveway paver, an emergency repairman who shows up after a major storm, or a landscaper with surplus plantings. Take your time to check contractors out (http://www.houselogic.com/articles/five-essential-questions-ask-before-hiring-contractor/) to make sure they have a good reputation and do quality work.
All of these situations can be difficult to resolve once you’re a victim (http://www.houselogic.com/articles/how-fight-back-against-bad-contractor/). But a little up-front effort now can keep you from throwing good money after bad later on.
A former carpenter and newspaper reporter, Oliver Marks has been writing about home improvements for 16 years. He’s currently restoring his second fixer-upper with a mix of big hired projects and small do-it-himself jobs.
Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS®
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