Don’t Let Home Improvement Scams Wreck Your Budget

Don’t let scammers demolish your home improvement budget.

Do you have a long list of home improvement projects? Maybe it’s fixing the roof, painting the exterior, getting new siding – or even adding a room. Your home is your most valuable asset, so finding a qualified professional who can do a good job at a fair price is important. Unfortunately, you may find scammers out there who will promise to do the work but end up damaging your home and your wallet. How can you tell a trustworthy contractor from a con artist?

In this article, we’ll look at six types of home improvement scammers, offer red flags to watch out for that could indicate a security risk, and show you how not to get cheated.

6 Crooked Contractors

Here are six types of home improvement scammers to watch out for:

1. Frontloaders- These scammers require full payment upfront or only in cash. They might drag their feet getting started – or they may never show up at all. Some states put limits on the amount of money a contractor can ask for as a down payment. To find the law in your area, contact your state or local consumer agency, which you can search for at usa.gov/state-consumer. If your state doesn’t legal limitations, how much should you put down? For your protection, experts recommend paying between 10% and 25% but no more than 30% to start a project. Another reason a contractor might ask for a big deposit upfront is that they’re behind on other jobs and will use part of your money to finish those projects. Doing that is illegal but quite common for shady contractors.

2. Lowballers- While everyone likes getting a deal, be wary of especially low estimates. In this scenario, the contractor quickly reviews your project and writes down their bid on a business card or scrap of paper. The estimate may be enticingly cheap but often doesn’t include all the details of the project. Once the contractor starts work, they “find” lots of issues and pile on extra charges by the time they’re done. According to experts, it’s important to make sure that estimates are detailed and include all work that must be performed. Make sure your final agreement lists materials, supplies, equipment, and any subcontractors who might be needed.

3. Cheapskates- Another popular trick from disreputable contractors is using subpar materials and cutting corners. They’ll substitute cheaper materials than those specified in the contract – like using a thinner grade of plywood or a lower-priced type of shingle or laminate. Scammers who use cheaper materials pocket the savings and leave you with a renovation that’s poor quality or even dangerous, which will require additional repairs. A legitimate contractor wouldn’t want to damage their reputation by using inferior materials or doing slipshod work.

4. Extortionists- While it’s not unusual for home improvement projects to go over budget, beware of contractors who ask for more money midway through a renovation. The contractor might have mismanaged money for the project, or the request for more funds might be a scam. The contractor completes part of the job – turning your home into a construction zone – and then refuses to finish until you pay additional costs. Experts recommend stipulating in your written agreements that any “extra money” for extra work will only be considered as a change order that describes a change to the original scope of work, which both parties must agree to and sign.

5. Looters- In this scam, the contractor uses stolen materials – sometimes saying that they were “left over from another job.” This is a major warning sign. Aside from being someone else’s goods, they won’t be under warranty. A legitimate contractor wouldn’t go this route.
6. Loan Sharks- Watch out for contractors who tell you that they can arrange financing for your project through a lender they know. This might be a home improvement loan scam. The contractor starts working and then asks you to sign some papers – usually without giving you time to review them. You can end up with a high-interest home equity loan that you didn’t want and nothing to show for it when the scammer takes the money and runs. It’s best to contact your financial institution about financing if you’re thinking of doing some home renovations.

Red Flags to Watch Out For

Before you hire a contractor, proceed cautiously, and watch out for these red flags that could mean a security risk:

• They show up uninvited. A contractor or individual may show up on your doorstep asking to speak with you. They say they were “just in the neighborhood” doing another job, or they may be going door-to-door after a damaging storm came through your area. Most reputable contractors don’t make cold calls like this.
• They pressure you to make a decision right away. To get you to act fast, scammers may promise a “limited-time discount.” Don’t fall for it.
• They demand full payment upfront or accept only cash. For your protection, you should never pay the full amount for a project before the work is completed. A reputable contractor won’t expect full payment and they won’t demand you pay in cash.
• They make a suspiciously low bid. That great deal won’t be so great if the contractor uses shoddy – or stolen –materials and cuts corners.
• They can’t show proof of insurance or a license. A legitimate contractor will always be able to show you proof that they are licensed for the type of work they will do and insured to cover damage to your home or to pay workers who may get injured while doing the work. A crooked contractor might provide a license that has someone else’s name on it. Of course, they have an elaborate story about why that is.
• They ask you to pull the necessary permits. A contractor might say that it will save you money, but it usually means they’re unlicensed. Don’t get any required building permits yourself. The contractor should be responsible for that.

Ways to Protect Yourself

Here are some ways to stay safe from home improvement scams:

• Stay away from contractors who show up at your door looking for work.
• Consult personal references, online reviews, your local home builders association, and the Better Business Bureau®.
• Get multiple estimates. While it can be tempting, don’t automatically take the lowest bid.
• Know the law in your area when it comes to requirements for licenses, permits, and insurance. Don’t do business with a contractor who can’t provide proof of insurance or licensure.
• Get a written contract and read it carefully.
• Make sure the contract states that any extra charges require a change order.
• Take pictures of the job at various stages.
• Don’t pay for everything upfront.
• Verify that the work has been done correctly before making the final payment.
• Instead of paying cash, use a trackable payment type like a credit card, check, or automated clearing house transfer (ACH).

 What to Do If You’re a Victim of a Home Improvement Scam

If you believe you’ve been a victim of a home improvement scam, here’s what to do.

• Contact your financial institution immediately if you’ve sent money to a scammer or shared your banking information.
• File a report with the Better Business Bureau’s Scam Tracker℠ at bbb.org.
• Notify your state attorney general of the scam at naag.org.

When you’re looking for a contractor, it’s important to shop around and do your research. You can save yourself time, money, and needless stress. Keep these tips in mind and put home improvement scammers out of a job! If you have questions about financing your next home improvement project, contact us for options.