How to avoid home improvement scams

By Stacker

Published July 12, 2023 2:19 AM

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How to avoid home improvement scams

A repair worker uses a crowbar as he works on a window frame.

Do you have some home projects in mind? If you’re considering paying someone else to take them on, it’s important to be cautious about scams by untrustworthy contractors. Home improvement scams that leave homeowners with incomplete or shoddy work occur more often than people realize. Knowing how to protect yourself from contractor scams can save you from the heartache and frustration of losing money to unscrupulous service providers. In this article, Today’s Homeowner looks at advice to avoid becoming a victim of a home improvement scam.

How Common Are Home Improvement Scams?

Unfortunately, home improvement scams continue to happen year after year. One of the darker sides of this issue is that America’s elderly population is a significant target for scammers. However, no class of consumers is entirely safe.

The surge in home improvements and remodels that occurred during the pandemic also led to a spike in these types of scams. According to the Federal Trade Commission (FTC), the number of home improvement scams reported during the pandemic years of 2020 to 2021 was 44,000. Shockingly, over $82 million was lost to these scams during the first two years of the COVID-19 pandemic. This phenomenon has come to be known as the “pandemic peak” due to the fact that home improvement scams reported to the FTC for the years 2015 to 2017 barely exceeded 3,000 annually.

Keep in mind that scam data published by the FTC only takes into account scams that are reported by consumers. Many scams go unreported.

As we mentioned earlier, elderly Americans are more vulnerable to scammers — and this applies across all industries. Many scammers see the 55 million Americans over the age of 65 as perfect targets. A 2021 Department of Justice report shows that 92,371 scam victims over the age of 60 lost $1.7 billion to scams in just that year alone. This figure represents a 74% increase in losses over those reported in 2020.

Roofing, painting, and paving are the jobs associated with the highest number of scams. Concrete work, flooring, landscaping, electrical work, plumbing, HVAC, and tiling are all included in the home improvement scams top ten.

Signs of Potential Home Improvement Scams

How do you sniff out a home improvement scam? There are several red flags to look for. We’ll delve into these below.

Scenario 1: A contractor knocks on your door to say they’re in the area

Contractors don’t generally solicit work directly. Most gain their business through websites and ads. Door-to-door scammers will often take advantage of severe weather events to target vulnerable homeowners needing quick repairs. They might even offer you a free roof inspection. In reality, reputable contractors in your area are likely to be too busy to be knocking on doors following a storm that has caused damage around town.

If a contractor approaches you to see if you need work done, always ask for a card or contact information that will enable you to research them online. Never agree on the spot to allow them to do work.

Scenario 2: A contractor demands a large down payment to complete the job

While it’s not uncommon for contractors to ask for down payments to be able to purchase materials, these payments should represent no more than one-third of your entire project cost. If a contractor asks for a large lump sum up front, this may be a sign that they are planning to make off with the money without completing the job.

Scenario 3: A contractor is willing to offer you a great rate on a “surplus of material” from a previous job

Why is this a red flag? First, it’s possible that the material doesn’t even exist. The scammer may simply be trying to get you to write a check. It’s also possible that the material is stolen or counterfeit. If the material being offered is roofing, it’s possible that the contractor is trying to sell you used roofing shingles pulled off of another house.

Scenario 4: A contractor says a decision must be made now to get the job done

When contractors place time-sensitive offers on the table, this is a high-pressure sales tactic. They’re attempting to get you to agree to work while you’re under duress. They may be hoping that you’ll sign a contract before you can research their background, get other quotes, or change your mind. No reputable contractor would confront a client with ultimatums.

Scenario 5: A contractor says they will handle the financing for you using their preferred lender

There are two ways this scam can go. In some cases, homeowners find out after the fact that they’ve signed documents for a high-interest home equity loan. In other cases, the contractor may simply flee after being paid in full by the lender.

While some reputable contractors offer financing as a way to make home projects more affordable to customers, they never insist that a customer use their lender. If your contractor does offer you financing, never accept it before shopping around for better rates and terms. If you do agree to financing, make sure you read through every line of the contract carefully without allowing yourself to be rushed.

Scenario 6: A contractor only accepts cash

A scammer might insist on cash to cut down on the paper trail.

Scenario 7: A contractor asks you to get the building permits

If your contractor insists that you pull permits for a project, it’s probably because they’re not properly licensed for the type or scope of work needed for the project. A permit should always be the responsibility of the contractor.

Scenario 8: A contractor tries to talk you out of going through an insurance company

If you were planning to use your homeowner policy to cover damage to your home, you might be surprised to find that your contractor is telling you to pay without going through insurance. If this happens, it’s likely that the contractor isn’t licensed or insured to do the work they are being hired to do.

Unscrupulous contractors will also sometimes try to get homeowners to misuse their insurance policies — a common example is when a contractor says they will help you avoid paying your deductible by providing you with an estimate that’s higher than the true cost for the repair. The contractor will then use the excess funds paid out to cover your deductible cost.

Unfortunately, sending false information about the cost of repairs to an insurance company is fraud. What’s more, contractors willing to waive a deductible are likely to make up for the difference by cutting corners during the project.

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How to protect yourself from a home improvement scam

Couple talks behind a table covered with repair tools and measuring tape.

Once you’re aware of the potential for home improvement scams, you can take advantage of some easy ways to stay protected. Following the steps below can dramatically reduce your chances of falling victim to charlatans.

Only Work With Licensed and Insured Contractors

Verify that your contractor is licensed and insured in your state by asking to see proof. Never take anyone’s word for it. Many scammers get away with it simply by betting on the fact that people won’t check this information. If you’re wondering where to start, check your state’s general contractor license verification database after obtaining a contractor’s license number. You can get to the right place by typing “verify a general contractor’s license in [state name]” into your search engine.

If a contractor refuses to show you their license or provide a license number, it’s time to move on.

Ask for References

Reputable contractors are always pleased to provide references for their previous work. Ask for up to five references that you can follow up with. When speaking with references, ask the following questions:

Are you pleased with the work?
Was the work completed on time?
Would you recommend this contractor to family and friends?
Would you use this contractor again?
Can you share photos of the work?

A contractor should also be willing to show you photos of finished projects similar to the one you’re having done.

Be Choosy With References

While many people are eager to recommend a friend, relative, or neighbor once they know that you’re looking for a contractor to do work on your home, it’s important to only use a general contractor coming as a referral from someone you know and trust. Ideally, this is someone who has worked directly with the person they’re recommending.

Use Local Websites and Social Media

Nextdoor, a town-wide Facebook page, and online forums can all be great places to get honest local recommendations on how to find a roofing contractor or other home improvement contractor. People on these platforms generally aren’t afraid to sound off when they’ve had a bad experience with a contractor. Similarly, people who are pleased with work that has been done are often eager to share a contractor’s name.

Don’t Pay a Large Deposit

Remember to keep the down payment to less than one-third of the total project cost. While a contractor may try to persuade you by saying that they need the money for materials, asking for a big chunk of change just to be able to start is a red flag.

Check the Better Business Bureau

Check the Better Business Bureau (BBB) for ratings on contractors. You’ll be able to see complaints made against them.

Check With Your State’s Consumer Protection Office

Many people are unaware that you can check with your state’s consumer protection office to search for complaints against a contractor. Many disreputable contractors are betting on the fact that consumers never learn this trick. Find your state’s office using this portal.

Get Multiple Bids

Don’t agree to a job until you’ve secured bids from at least three contractors. Get those bids in writing to avoid a conflict that comes down to a war of words. Generally, going with the lowest bid is discouraged unless the numbers are close. If one bid is significantly lower than the others, throw that one out. It’s simply not feasible that one contractor would be able to offer the same service for so much less unless they are cutting corners on quality. They may also be luring you in with a low price before bolting with the down payment in hand.

Always Get a Written Contract

Once you’ve chosen a contractor, insist on getting a written contract. Take time to pore over the fine print to ensure that you understand the scope, pricing, and terms. A contract needs to contain a detailed description of the work, full materials costs, start and completion dates, and warranty information.

Never Rush

Scammers are counting on you to make a rushed decision. They also hate it when customers go to friends and family for advice on what to do. If a contractor is applying pressure, this is a sign that they want to lock you in before you can figure out what’s happening. Take time to do your research on the contractor until you feel comfortable about welcoming this person into your home to do work. Proper due diligence is everything when you’re protecting your home and money.

Conclusion

In a perfect world, you could be trusting of every contractor. However, the fact is that many contractors who promise the sun and the moon are simply using your unsuspecting nature to scam you. Fortunately, weeding out the bad apples will put you in place to work with one of the thousands of reputable, hardworking, and talented contractors throughout the United States capable of taking on your project.

Scammers are ready to take advantage of the fact that not all homeowners know how to ask the right questions, do their research, and be persistent about only moving forward when things feel right. There’s no need to worry about work that’s built on a house of lies happening at your house when you know how to avoid home improvement scams.

This story was produced by Today’s Homeowner and reviewed and distributed by Stacker Media.