Home improvement scams can start with a knock at the door, a flier, or an ad. They’re especially prevalent after a major storm, flood, or other weather event when many homeowners are repairing their homes. However, this isn’t necessary; these scams can happen anytime. It’s important to be wary of high-pressure sales tactics, upfront fees, and fly-by-night businesses. [1]
What is contractor fraud?
Contractor fraud is when individual contractors or contracting firms commit illegal business practices when hired to renovate, repair, or rebuild residential properties. This is also referred to as “home improvement scams” and encompasses a range of issues, from inadequate repairs to substandard materials and overbilling. Contractor fraud can cost the victim twice: once when they lose a significant amount to the fraudster, and again when they have to pay a legitimate firm to bring the work up to standard or repair the damage. [2]
5 contractor scam warning signs
If you’re concerned about getting scammed by a contractor, here are the warning signs to look out for:
- Needing all the money upfront: Paying them at the beginning means they can disappear on you or do inadequate work, knowing that you can’t really fire them.
- Taking the contractor’s word for it: When the contractor verbally agrees to many specific details but doesn’t include them all in the contract agreement.
- Not needing a permit: If the job is small enough, a contractor may try to tell you that they don’t need a permit, even though it’s legally required.
- Running into unforeseen problems: Once the job is underway, the contractor informs you that the already agreed-upon price has dramatically increased due to structural issues or design changes.
- Selling you extra materials for cheap: When a crew shows up to your house and promises cheap materials that can’t be returned to the supplier. [3]
How to avoid home improvement scams
Keep an eye out for the warning signs above to avoid home improvement scams. Also, below are a few tips on what you should do when hiring a good contractor:
Do not immediately hire a contractor
Never hire a contractor on the spot. Whether it’s a driveway paver, an emergency repairman or a landscaper, always take your time to evaluate contractors to ensure they have a good reputation and do quality work. [3]
Carefully read the contract
First and foremost, never do business with a contractor who refuses to sign a contract. Thoroughly inspect your contract before signing to ensure that your needs are met. The contract should include the contractor’s name, address, phone number and license number. The estimated start and finish date, detailed scope of work, cost of labor and explanation of building materials should all be in the contract as well. Lastly, a written statement of your right to cancel the contract within 3 business days should be in the contract. [4]
Read all customer reviews
Read customer reviews to find out more about the contractor, and use online rating websites you trust to see what others are saying about the contractor. [5]
Do not provide the full amount upfront
Some states limit the amount of money a contractor can request for a down payment. Contact your state or local consumer agency to understand the laws in your area. Also, never make the final payment until the work is done and you’re satisfied with it. [5]
Vet the contractor’s list of references and use the Better Business Bureau
You can look for a contractor’s profile on the Better Business Bureau website for information on the history of complaints, previous consumer reviews, and also to see if the contractor is BBB-accredited. [2]
What to do if you’ve already been scammed by a contractor
If you have a problem with a home improvement project, here are some options:
- Try first to resolve the problem with the contractor.
- Follow up on any phone conversations you have with a letter you send by certified mail. Request a return receipt so you can prove that the company got your letter.
- Keep notes and copies of letters and documents for your files.
If you can’t resolve the problem with a contractor, consider getting outside help from your state attorney general, your local homebuilders association, your local media outlets’ Call For Action lines, or dispute resolution programs. [5]
Now that you’ve done the research and picked your contractor carefully to avoid any scams, make sure your home is protected with homeowners insurance.
Sources:
[1] “BBB Scam Alert: Home improvement scammers take money, don’t complete work,” bbb.org/article/news-releases/16924-bbb-tip-home-improvement-scams (Accessed August 2023).
[2] “Contractor Fraud,” Julia Kagan, investopedia.com/terms/c/contractor-fraud.asp ( Accessed August 2023).
[3] “Top 5 Contractor Scams (and How to Avoid Them),” houselogic.com/remodel/budgeting-contracting/top-5-contractor-scams-and-how-avoid-them (accessed Jan. 2023).
[4] “How To Avoid A Contractor Scam,” Daria Smith, Samantha Allen, forbes.com/home-improvement/contractor/how-to-avoid-contractor-fraud ( Accessed August 2023).
[5] “How To Avoid a Home Improvement Scam,” consumer.ftc.gov/articles/how-avoid-home-improvement-scam (Accessed August 2023).
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