How To Avoid a Home Improvement Scam

Signs of a Home Improvement Scam

How can you tell if a contractor might not be reputable? Here are some tactics scammers use:

• Scammers knock on your door looking for business because they are “in the area.”
• Scammers say they have materials left over from a previous job.
• Scammers pressure you for an immediate decision.
• Scammers ask you to pay for everything up front or only accept cash.
• Scammers ask you to get any required building permits.
• Scammers suggest you borrow money from a lender they know.

How To Avoid a Home Improvement Scam

Here's some advice to help protect yourself and your money:

• Consider only contractors who are licensed and insured. Check with your state or county government to confirm a contractor’s license, and ask the contractor for proof of insurance.
• Get contractor recommendations from people you know and trust.
• Check with the local Home Builders Association to see if they have complaints against a contractor. Also search online for the company’s name with words like “scam,” “review,” or “complaint.”
• Read reviews with a critical eye. Read customer reviews to find out more about the contractor and use online rating websites you trust to see what others are saying about the contractor.
• Get multiple estimates. A written estimate should include a description of the work to be done, materials, completion date, and the price. Don’t automatically choose the lowest bidder. And ask for an explanation if there’s a big difference among the estimates.
• Read the contract carefully. Contract requirements vary by state. Even if your state doesn’t require a written agreement, ask for one. Before you sign a contract, make sure it includes
  • the contractor’s name, address, phone number, and license number
  • an estimated start and completion date
  • any promises made during conversations or calls related to issues such as the scope of work and the cost of labor and materials
  • a written statement of your right to cancel the contract within three business days, if you signed it in your home or at a location other than the seller’s permanent place of business

And, make sure all blank spaces are filled in.

• Don’t pay the full amount for the project up front. Some states actually limit the amount of money a contractor can ask for as a down payment. Contact your state or local consumer agency to find out the law in your area. And never make the final payment until the work is done and you’re satisfied with it.

The Home Improvement Loan Scam

Sometimes, contractors will not just scam you through the work they do — or don’t do. Sometimes, they’ll actually set up a scam that ends with a loan against your home.

Here’s how it works: a contractor calls or comes to your door. He offers a deal to install a new roof or remodel your kitchen. He says he can arrange financing through a lender he knows. After he starts work, he asks you to sign papers. They may be blank — or he might hustle you along and not give you time to read through them. Later, you find out you’ve agreed to a home equity loan with a high interest rate, points, and fees. What’s worse, the work on your home isn’t done right or isn’t completed, and the contractor — who may already have been paid by the lender — has stopped returning your calls.

To avoid a loan scam

• Never agree to financing through your contractor without shopping around and comparing loan terms.
• Never agree to any loan without understanding the terms of the loan and knowing whether you can make the payments.
• Don’t sign a document you haven’t read, is in a language you don’t understand, or that has blank spaces. If you talk with a salesperson or contractor in a language other than English, depending on where you live and what you’re buying, you may be entitled to get a copy of the contract in that language. This lets you read and understand the contract before you sign the English version.
• Don’t let anyone pressure you into signing any document.
• Never transfer your deed to anyone without consulting an attorney, a knowledgeable family member, or someone else you trust.

Report a Problem

If you have a problem with a home improvement project

• First try to resolve it with the contractor. Many disputes can be resolved at this level.
• Follow any phone conversations with a letter you send by certified mail. Request a return receipt, so you can prove that the company got your letter.
• Keep notes and copies of letters and documents for your files.

If you can’t resolve it with the contractor, consider getting outside help from

• your state attorney general or local consumer protection office
• your local home builders association
• your local media’s Call For Action lines
• dispute resolution programs