Warning Signs of a Home Improvement Scam

by Ron Haynes


In the gardenMore people are remodeling their homes today because of the credit crunch. Unable to continually buy and “move up,” it’s a natural step because people seem to love to improve their surroundings. Having worked in the building materials industry for 25 years, I have seen more than my fair share of scams, some of them whoppers. Home improvement is an area that is particularly susceptible to scams and con artists because of the mystery that surrounds the proper licenses, permits, building codes, and home contractors in general. People are worried that they will not have the skills to perform many of the home improvement tasks themselves, despite having watched it on HGTV 100 times!

The best defense against a home improvement scam is information.

I remember in particular, one couple that moved to the South to retire. They had dutifully saved their money and had bought one of the most beautiful lots I have ever seen. They planned to build a home and pay cash for everything. After getting several bids from home contractors, they selected the one that was the lowest. He was significantly lower, too. I think a little greed took over.

This guy insisted that the couple pay him a chunk of an advance up front, get the permit themselves, and personally pay the lumberyard for all materials — with him as an authorized purchaser.

He was the king of home improvement scams. He didn’t make off with the first advance, though they wished he had. He so totally botched the building of their home that the entire structure had to be demolished and started over. He was long gone by then. It was horribly sad to see that little couple have to get a mortgage and part time jobs to make extra money and pay for their home that was to be completely debt free.

Never select the lowest bid.

There’s a reason the bid is low. There may have been something left off, intentionally or unintentionally. There may be a different quality of materials quoted. There may be different warranties, different methods of building, or different sub-contractors performing the work. The lowest bid isn’t the cheapest in the long run!

Knowing the proper questions to ask will go a long way in helping you avoid getting conned in a home improvement scam.

1. Never allow yourself to be forced to make a decision right away. Any time a contractor puts pressure on a homeowner to act quickly about making a remodeling decision, that’s a red flag. These decisions should be made carefully, hot hastily.

The signs of a scam:
A hurried demeanor and a contractor that wants you to sign a “standard” contract without reading it.

The defense: Tell the contractor that before beginning any home improvement project, you have a rule of checking references and having your attorney read the contract.

2. Ask for references from everyone that will work on your project. But references are worthless unless you call them and physically inspect the work. Always ask the reference how the contractor resolved any problems…there are always problems. While you’re checking, check that the contractor has adequate insurance (including worker’s compensation and liability) and that the policies are in force and will cover anyone working on the job site. Verify this! Ask for the name of the insurance agent or company that handles his/her policies. Also check that the contractor’s license is up to date, in force, and that he/she isn’t under review for violating ethics or building codes.

The signs of the scam: A contractor that won’t willingly give you this information is one you should avoid. He may insist that homeowners are the ones that get the permits and that he doesn’t because of the added cost to the job. Hogwash. Move on.

The defense:
Check references before you sign anything.

3. Make sure the contractor performing your home improvement project has credit at local suppliers.
A good business person will have trade credit available to him/her and won’t need you to pay for the materials up front.

The signs of the scam:
Look out for home improvement contractors that have material left over from other jobs and want you to pay him/her for them up front. Also, watch out for those who insist that you pay for the materials separately from labor costs. There’s a good chance that this contractor is less than honest in his/her dealing with suppliers and doesn’t keep his/her word. If that’s the case…

The defense: Ask where the contractor plans to buy the materials for the project. Then call the materials dealer and simply ask if this person has a good reputation. You would be amazed at how much information people will give you if you only ask. You can also deduct quite a lot of information from body language and tone of voice. Trust your gut.

4. Never agree to pay cash up front.
There is a very good chance you will never see the contractor or your money ever again. This is a very simple idea, but it never ceases to amaze me that in the 21st Century, people STILL fall for this and pay a guy in a beat up pickup truck a large amount of cash…and then never see him again.

The signs of the scam:
A home improvement contractor that is in such a desperate need of cash that he/she has to get an advance “up front,” is a very poor business person. Don’t, please don’t, do business with anyone that has a cash flow problem.

The defense: Again, references are your best friends. Ask where the contractor banks, ask if he/she would mind if you spoke with their banker about how the contractor’s bank account is managed. If he is suddenly dodgy or gets angry…move on.


Don’t be afraid to ask lots of probing questions. This is YOUR HOME we’re talking about. You need to know everything possible about the people who will be in your home and their character and work habits. Don’t let embarrassment keep you from asking for references!

To really find a good home improvement contractor and avoid becoming a victim of a home improvement scam, check with several locally owned and operated lumberyards. These guys know who pays their bills on time and also know who has the best reputations. But be prepared to wait for a really good contractor. They’re busy…for good reason…and that’s a good thing!

photo credit: ravik694

[tags]home, improvement, home improvement, home improvement scam, remodeling scams, choosing a contractor, home remodel scam, real estate, diy, pergo, installation, consumer laws, money[/tags]

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 6 comments }

Frugal Dad

My grandfather was taken once by someone offering to replace an old-fashioned window in his old home. The guy came by, took some measurements, and asked for $200 up front because this would be a “special order.” My grandfather gave him the money and never heard from him again. I was livid, but we didn’t have much recourse. I just hope I see the guy around town (I saw him talking with my grandfather, but was late for work and left without being part of the discussion–unfortunately).

Older generations are often preyed upon because they are more trusting, and more likely to pay cash. Hopefully your article, and this cautionary tale, will prevent someone else from being scammed. It is definitely a good time to have your guard up!

Ron

#Frugal Dad→
There’s a lot of that going on just after a natural disaster as well. With the predicted landfall of TS Fay (maybe Hurricane Fay), there will be plenty of con artists trying to separate people from their money to replace roofs, rebuild storage sheds, repair carports, etc. In these cases, many people are desperate to get the work done to prevent further damage to their home by the elements.

It pays to tarp, wait, and check.

Sara at On Simplicity

Have you ever watched Holmes on Holmes? It’s the exact thing you’re talking about here, and the results are incredibly awful. I’m scared to death of home improvement because of this, but your tips seem like a solid safety net.

Chris

Best piece of advice you gave – Do not give the contractor more than a few dollars for a downpayment to start the work. In the state of California, it is against the law for a contractor to ask for more than $1,000 on any size residential job. They still ask and people still pay it. Incredible.

Ron

#Chris→
Thanks Chris. That’s a great idea. People don’t realize that when they hold the money, they hold the cards! Money will make sure the job is completed. Money will make sure they show up for work. If you agree to pay them every Friday, you’ll be amazed at the work that gets done on Thursday. Funny how they always show up and work hard when it’s payday!

Thanks for stopping by and commenting!

john

I think a new scam coming is some of these new lead or advertising services that target
small business and home improvement people..

They take money from small business guys and promise to bring them leads

but never deliver any leads and then demand they pay for leads and advertising they never
get..

or just take a deposit and forget all about that small business.. and charge a large monthly fee

contractors I would proceed with caution with the likes of homeimprovementshopper.com
or constructiondeal.com

Just beware…

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