Watch Out for Contractor Scams
Protect Yourself and Know What to Look For
The vast majority of remodeling contractors are honest, hardworking, conscientious people who take pride in their work. Unfortunately, like any profession, it only takes a few bad apples to give every contractor a bad name.
A kitchen renovation project represents a significant investment. And with a lot of money at stake, you’re a target for scam artists who want to take your money and run. Your best defense against an unscrupulous contractor is knowing what to look out for when you hear an offer that’s “too good to refuse.”
Here are some things to watch out for.
How can you tell if a contractor might not be reputable? You may not want to do business with someone who:
- pressures you for an immediate decision
- only accepts cash
- asks you to pay everything up front
- suggests you borrow money from a lender he knows
- asks you to get the required building permits
- doesn’t have any internet presence
- tells you he doesn’t need insurance
- isn’t readily available to answer your calls
Reduce Your Chances of Getting Taken
You can reduce the chances of getting taken by an unscrupulous contractor by following a few tips:
- Always have a written contract before any work is done.
- Get a detailed scope of work. A scope of work sets out exactly what the contractor is going to do, including enough detail that there can be no question as to responsibilities.
- Ask for proof that the contractor has proper licenses and insurance.
- Ask for references and check them. Also check with suppliers they use. A problem with paying suppliers may be a sign this contractor is on shaky financial ground.
Scams Other People Have Fallen For
Other homeowners have been taken in by unscrupulous contractors in the past. Here’s a few of them. We want you to be forewarned and forearmed.
“I Can Help You Finance Your Job”
A contractor says he can arrange financing through a lender he knows. Then he asks you to sign papers. Later you find out you’ve agreed to a home equity loan with a high interest rate and associated fees. Also, the contractor is getting a kickback from the lender.
To avoid a loan scam, don’t sign a document you haven’t read or that has blank spaces to be filled in “after you sign”. You shouldn’t agree to financing through your contractor without shopping around and comparing loan terms.
“I’ll Need the Money Up Front”
This is the most common scam reported to the Better Business Bureau.
The contractor explains that because he must order materials to get the job started, he needs 50% of the project price up front. Once you’ve paid him, one of two things happens: (1) he disappears, or (2) he starts doing shoddy work knowing that you can’t fire him because he’s got your money.
If the contractor you’re considering asks for 50% up front, it’s likely that he is trying to cover costs on other projects he’s come up short on. Large down payments are a big red flag.
A reasonable down payment is part of the process, but an excessive down payment is a sign they may take your money and run. The typical payment agreement will begin with a 10% to 15% installment. Throughout the project, you can expect to pay several small installments followed by a final 10% to 15% after the work is complete.
Angie’s List reports that about 75% of home improvement pros are willing to negotiate down payments.
To protect yourself, never prepay more than $1,000 or 10% of the job total, whichever is less. That’s the legal maximum in most states, and enough to establish that you’re a serious customer .
“Take My Word for It”
When you first meet with the contractor, he’s very agreeable about doing everything exactly to your specifications and even suggests his own extra touches. Some of the details don’t make it into the contract agreement, but you satisfied because you had such a clear verbal understanding.
Then you start to notice that the extras you discussed aren’t being built. Then the contractor tells you that he didn’t include those features in his price, so you’ll have to live without them or pay additional money to redo the work.
You always need to put everything in writing. A written contract protects both you and the contractor. Make sure the contract includes:
- a schedule of work
- payment terms
- procedures for changes
If things go wrong, a written contract is the strongest legal protection you have.
“I Don’t Need to Pull a Permit”
You’re legally required to get a building permit for any construction project, which allows building officials to visit the site to confirm that the work meets building and safety codes.
The contractor may ask you to apply for a homeowner’s permit, but taking out your own permit for a contractor job means lying to authorities about who’s doing the work. And it makes you responsible for monitoring all the inspections — since the contractor doesn’t answer to the inspector, you do.
This should always be a big red flag. A contractor who doesn’t want to pull permits is likely to be unlicensed, to cut other corners, and to avoid authorities taking a close look at their work.
“We Ran into Unforeseen Problems”
The job is already under way when the contractor informs you that the agreed-upon price has gone up. He blames unforeseen structural problems or design changes you made after the job began.
The additional fees might be legitimate, but some unscrupulous contractors bid jobs low to get the work and then find excuses to jack up the price later.
If you’re unsure whether your contractor is telling the truth about structural problems, you can get an opinion from a home inspector or the local branch of the National Association of Home Builders (NAHB).
Before signing the contract, make sure it includes a procedure for how change orders will be addressed.
“My Offer is Only Good for Today”
Qualified contractors don’t need to use high-pressure sales tactics. A kitchen renovation is a serious investment, and a good contractor will understand that it’s worth your taking a few days to think it over.
Don’t be pressured into accepting a deal that will expire before you’ve had a chance to do research, get competing bids and check references.
“What’s Your Problem, Lady?”
If your contractor has a bad attitude from the start, it’s a big old warning sign. This person is going to be in charge of your kitchen remodel and will be in your life for months. If he is negative and hard to talk to during first phone calls or meetings, he will most likely be the same throughout the project.
A professional attitude shows that he will take you seriously and do good, quality work. The best pros are open to questions and calmly come to you with any difficulties and solutions they recommend.
“Maybe I Can or Maybe I Can’t”
The contractor should be able to detail the work necessary and the time needed to do it. After signing the contract with you, he should stick to it.
If he is hesitant or refuses to commit, he may not be confident in his estimates; he may not know what he is doing.
“At the Sound of The Tone, Please Leave A Message for Joe Contractor”
One of the biggest issues homeowners have with their contractor is that they are late for appointments or don’t show up at all and are difficult to reach. A reputable contractor should be able to stick to their commitments as closely as possible and respond to your calls within a reasonable period.
“That Wasn’t Part of My Price”
It’s rare that a project goes from start to finish without at least a few changes being made by the customer. It may be as simple as a change in style for a light fixture or a new wall color. However, some changes cause more work or material cost for the contractor and are known as extras.
How extras are to be handled should always be spelled out in the written contract so there aren’t any unpleasant surprises at the end of the job.
Even more important is that you should be made aware that something will be an extra and told its cost before the actual work is done. Then you won’t be thinking your final payment for the finished project will be $5,000, but instead you get an invoice for $8,000 that includes $3,000 worth of extras that you didn’t expect.
“I’ve Been in Business for 20 Years and Never Had Insurance.”
You should end the conversation immediately if a contractor tells you they can give a lower price because they don’t have insurance. To allow a contractor, his employees and sub-contractors to work on your home without insurance can make you liable if anyone gets hurt during the project. Your homeowner’s insurance may not cover any damages to your home.
The Bottom Line
Numerous online resources exist that can help protect you from scams. The Better Business Bureau, Angie’s List,and the Department of Consumer Protection will let you check the contractor’s business reputation and credentials. A history of consumer complaints, lawsuits and expired licenses are all reasons to keep looking.
Contractor referral sites such as ReliableRemodeler.com, the National Association of the Remodeling Institute (NARI) , Thumbtack, Home Advisor or Houzz.com are all good places to search for a reliable contractor, one you’re comfortable working with.
Common sense and good judgment offer the best protection from unscrupulous contractors and home renovation scams. Get multiple estimates before starting any project and don’t sign any contract that you don’t understand completely.
KDP exists to offer insight and advice about all things related to kitchen remodeling. Our goal is to connect homeowners with talented, experienced kitchen designers who live and work in their communities. We are a serious resource for anyone preparing to remodel their kitchen so they can make the best possible choices about designers, contractors and products.