Hiring a Contractor

Find a contractor you can trust. Don´t be a victim of contractor fraud.

If you own a home and have a project that´s bigger than you want to tackle, you run a risk of being scammed by a fraudulent contractor. Contractor fraud in the home improvement industry is consistently one of the most inquired about AND complained about industries at the Better Business Bureau. If you think fraud victims are limited to gullible little old ladies, think again. Some unscrupulous contractors can be clever and plausible, and that makes them a hazard to most of us.

Watch out for red flags

There are a variety of ruses used by disreputable contractors. Some are simple, some are very elaborate. All of them can leave you poorer and wiser.

Get a construction loan

Occasionally, homeowners will do everything right and still get taken. One day work is progressing and the next the contractor has vanished with your money. Usually in trouble when the agreement is signed, there may not be any way to know in advance. However, you can add an extra layer of protection.

Some homeowners have discovered that there is a bit more security in taking a construction loan, which is then administered by the bank or credit union. The contractor submits his invoices for time and materials and the bank cuts him a check as work is done. Payments are often made the same week invoices are submitted. All parties are protected from any misbehavior.

Most contractors who have worked with this sort of arrangement are fine with it. Some have not and might be reluctant until you explain the bank's terms and procedures. Be wary of contractors who simply refuse. Most reputable contractors should be stable enough to accept progress payments made within 10 days of invoice submission.

This process also permits the time needed to inspect work as it occurs.

The free inspection

A roofer might knock on your door and offer a free inspection. His sales pitch may be a story about how he and his crew are working in the neighborhood on similar homes and that since they have jobs going there already, they can offer outstanding pricing because they can buy materials in bulk and pass the savings on to you. With a smile and a wink, he gets your business. What do you have to lose?

From here, the story can vary depending on the contractor´s creativity, but he generally does the inspection and, guess what? You need work done and you need it now. Because he´s there just in the nick of time with the materials, he´s going to give you a smashing deal. You feel relieved that you´ve caught a problem before it gets out of hand and the work gets done for a fraction of the cost! Such a deal.

This scenario works because it plays on fear, lack of knowledge, and the fact that most people are trusting, busy, and often on the lookout for a bargain. Instead, this scenario should raise a big red flag. Reputable contractors never solicit business this way and most suggest that you obtain other estimates before you sign any kind of agreement.

The risks you run by taking this contractor up on his offer include the probability of shoddy workmanship, substandard materials, and no warranty. Chances are your roof needs no work at all. Pricing may be out of line for the type of project, so you can wind up with an expensive roof that needs to be redone at additional expense!

The insurance scam

Another approach might be a contractor suggesting, since it´s obvious that you need new siding or a roof, that he sort of help the damage along a bit. You then submit a claim to the insurance company saying that something else (a storm, tree, wind, broken pipes) damaged the property. The contractor makes it sound so reasonable. He offers to make the repairs, so you don´t need to pay the deductible. It sounds easy, but there´s one small problem. It´s insurance fraud and you are a participant. Insurance companies actively pursue and prosecute fraudulent claims and you, not the contractor, will be on the receiving end of their justice, which can cause you untold financial hardship.

The class action scam

One contractor in Alabama was sentenced to prison recently for conning homeowners with a fake class action suit scam. This contractor told the homeowners that they would be reimbursed for what they paid him through a class action settlement for well known siding products. He claimed that not only would the siding manufacturer pay for siding, but also for unrelated repairs. He told homeowners that the siding manufacturer would refund him for repairs, then he would refund the homeowners.

Take the money and run

The simplest contractor scam is the knock on the door, already in the neighborhood type. Like the roofer, this contractor claims to be able to do small jobs quickly and cheaply. You pay him for supplies, he takes the money, and doesn´t come back. Sometimes for good measure, he´ll do a little demolition. First he steals from you, and then damages your property. Not only did you lose money, but now you have to hire someone else to fix the mess.

Protect yourself

The primary rule for avoiding contractor fraud is never work with a contractor who shows up at your door without your invitation. If you didn´t initiate contact, you probably don´t need him.

To further protect yourself, follow these suggestions:

Plan your project. Regardless of the type or size of project, if you plan what you want done, you will be able to describe the project in detail. The benefit is that you´ll get estimates that meet your requirements and reduce the possibility of cost overruns. It also ensures that you´ll be comparing apples to apples.
Get at least three written, detailed estimates. If there are large differences in price, get an explanation.
Check the contractor. Obtain copies of his license, as well as liability and worker´s comp insurance. Call your state contractor´s board to make sure his license is in good standing. Check with the contractor´s board and the Better Business Bureau to make sure there are no outstanding complaints or suits against him. Check the term of the insurance. If the insurance term is due to expire during your project, get proof that the insurance has been continued.
Obtain and check references with names, addresses, and phone numbers. Also, ask the contractor for jobs in progress where you can make a site inspection.
Ask how cost over runs, clean up, and unexpected problems are handled. If something is damaged during construction, for example, the contractor should have a plan in place to make repairs or replacements.
Be wary of any contractor who asks you to pick up permits, fails to answer questions about the work, its progress, the contract, or fails to provide a complete list of subcontractors with names and licenses. You need to know exactly who is on your job, and that they are licensed and insured. It´s not uncommon for some contractors to subcontract work then not pay the sub. The subcontractor then files a “mechanic´s lien” against you. Effectively, you pay twice for the same work.
Ask the contractor for a lien release.
Make frequent inspections of the work in progress.
Be sure all permits have been obtained and that inspections are in order.

The good guys

The vast majority of home contractors are hardworking, honest, reputable small-business owners who work hard to make sure that they do high quality work, use good materials, and provide solid value at a reasonable cost. They are dedicated to your satisfaction and earnestly want to earn your recommendation. Many contractors are members of professional organizations or unions that actively work to weed out contractor scams and fraud.

By doing your part to protect yourself, you can prevent getting taken by clever, manipulative contractors.

To hire a qualified contractor, check licensing and references. Or work through a service like ContractorNexus to find local professionals.