Owner Beware: Scams on Homeowners

As spring approaches, so do certain contractors – in fact, they may even knock on your door. Scammers posing as legitimate contractors often target cities and communities in areas hit by natural disasters, according to the Federal Trade Commission’s consumer education arm. Shady contractors may dupe homeowners into paying upfront for work they’ll never perform, or low-quality work carried out by unlicensed or unqualified employees. They may also target older individuals or a specific neighborhood.

Beware of “free” inspections. If a contractor advertises or approaches you with an offer for a very-low-priced or free estimate, proceed cautiously, says Tom Kraeutler, former inspector and now host of the nationally-syndicated radio show and podcast, The Money Pit. “These contractors often find something terribly wrong with whatever they’re inspecting,” he says. For example, a free chimney inspection may have a chimney sweep warning you of an extremely expensive repair and dire consequences, such as your house burning down. Always get a second opinion, and multiple bids for any potential issues.

Elude age-based discrimination. If you or someone you love is older, know that you may be at risk of targeted contractor scams. “Senior citizens who can’t physically get to a space like a crawl space or roof may be contacted by a contractor, who inspects that space, and says there’s something horribly wrong and requires an immediate, costly repair,” Kraeutler says.

Shun neighborhood scams.At times, there seem to be contractors “working an area,” offering probably-unnecessary services up and down the block purported to extend the life of a house component, whether driveway sealing or roof painting. “There are contractors out there who claim to give your roof an extra five years of life with their paint’s ‘magical formula,’” Kraeutler says. In fact, he notes, pitched roofs should never be painted; although flat roofs frequently are upon installation.

Investigate licenses and references. At a minimum, contractors should have a license and insurance, but “licensing doesn’t always mean honesty,” Kraeutler notes. Requirements can vary wildly between differing states, counties and cities – some licenses only require a driver’s license and other minimal standards. The same goes for valid insurance and liability for harm while on property. Research potential contractor hires using online reviews with websites like HomeAdvisor, Better Business Bureau or Yelp; word of mouth; and previous references.

Baffle swindlers. Pay contractors first in a small, limited deposit, never in an up-front all-at-once chunk. Ensure there’s a written contract that lays out work to be performed, how it will be completed, the costs and how problems will be resolved. The contract should stagger payments based on completed work and inspections, whether by municipal or private inspectors, Kraeutler says. Don’t pay for the whole job at once, and don’t accept a contractor’s excuse that they need more money for the job – they should be able to manage their business’ cash flow, not you.

Skip lending scams. Watch out for remodeling or other big-ticket contractors who have direct relationships with lenders, Kraeutler says. You may be encouraged to sign a blank or low-information form, only to find out you’ve signed on to a home equity loan with exorbitant interest rates, points and fees, according to the Federal Trade Commission. Keep looking around for better loan terms and a contractor not already wrapped up with a bank or other lender.

Other red flags. Avoid contractors who show up with materials remaining from previous jobs, attempt to pressure you into an immediate decision, ask you to arrange all permits and inspections, or offer “special” prices, according to the Federal Trade Commission. The FTC’s site offers information about a variety of unusual scams, such as “house wrap” from a particular company.

As well, watch for contractors who underbid other contractors – they may be cutting costs in other ways, such as in materials, work and other quality-related issues. Read more about scams at the National Association of Homebuilders.

Discover more about finding, hiring, paying and troubleshooting a contractor’s work at the FTC’s Hiring a Contractor.