January 25, 2020
Ah, summertime. The weather warms up, the flowers bloom, and the flocks of home improvement scammers return for their annual summertime gathering.
Like other unwanted pests, shady home improvement contractors tend to show up in the spring and summertime offering services ranging from driveway sealing to chimney repair to roof replacement to a complete home makeover. These scam artists often prey on the elderly, who can be more easily tricked or bullied into signing bad contracts. Avoid this situation by taking some precautionary steps.
- Initiate the Search – Some contractors will approach you unsolicited and ask if you want particular work done because they just happen to be in the area, have excess supplies to deal with, or would like to use your home as a model for their services. Even if they seem sincere, ask for contact information and let them know you will be in touch if you need work done. Never sign contracts on the spot.
Do not let an unsolicited contractor enter your home. They could be casing your home looking for items to steal or ways to defeat your security system.
Red flags are vehicles with no company name or phone number to contact, out-of-state license plates, or limited-time offers. None of those situations guarantees that a contractor is not legitimate, but it gives you extra cause for concern.
In some cases, scam artists will contend that a situation is unsafe and must be repaired immediately. Have this verified by the proper agency (utility company, building inspector, etc.) before signing up for any work. The scam artist may be correct, but that does not mean they will fix the problem correctly.
- Research the Vendor – Ask for references from multiple jobs and follow up on them. Check reviews on Angie’s List or other online sources, as well as with the Better Business Bureau. Verify that they are licensed and bonded for damage/theft protection, and that they have suitable liability/worker’s compensation insurance.
- Beware Up-Front Cash – Legitimate contractors will also want some amount of deposit, but avoid anyone asking for full payment, or the majority of payment, up front. Once they have your money, a scam artist will be long gone before you realize you have been scammed.
Work out a payment schedule with your contractor up front, and make sure that some significant amount of the payment is due upon completion and acceptance. Paying in thirds (one-third up front, one-third during the project, and one-third at completion) is a good way to spread the risk between both parties. Pay with credit cards or checks instead of cash. Ask for a lien waiver before the final payment; this verifies that any subcontractors and suppliers have been paid and have no reason to go after you.
- Beware of Contractor Financing – If financing is necessary, it is best to secure it yourself. Financing through a lender suggested by the contractor may involve kickbacks. Carefully review any contract, as there are many potential tricks when the contractor is involved. Possibilities include hidden charges and deceptively high interest rates, starting work before financing terms are revealed, and using multiple confusing contracts — some contracts effectively allow the contractor to obtain a mortgage on the home.
Once the contract is signed, your options are limited. Failure to pay can result in a mechanic’s lien being placed on your home, and could potentially lead to foreclosure. Scam contractors will threaten the use of a mechanics lien just to get you to pay.
The Federal Trade Commission (FTC) typically allows three business days to cancel a contract via buyer’s remorse, but after that, you are generally stuck with remedies through the court system against the contractor and may still be on the hook with the lender. Seek legal advice if you end up in this situation.
- Insist on Contract Terms – You do want a contract; you just want it to be on your terms as much as possible. Make sure that it outlines the work to be done in detail and the materials to be used, warranty provisions, start/completion dates, and costs with contingencies. Verify that both parties are in agreement before the work begins.
Take sufficient precautions and you will have a successful home improvement experience. Fail to do so and you run the risk of being scammed — stuck with a home problem that is at least as bad as it was (if not worse), out of a large chunk of funds, and potentially in debt to others.
MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders.