10 ways to avoid contractor scams
Natural disasters leave behind a wide path of devastation — and open the door for con artists. Here’s how to outsmart them.
Thousands of people will be rebuilding or dealing with repairs as a result of nature's most recent bad behavior, otherwise known as Hurricane Irene. Unfortunately, natural disaster and the devastation it wreaks on our homes is the cue for con artists and grifters to move in.
Phae Howard of the National Center for the Prevention of Home Improvement Fraud, a nonprofit dedicated to helping homeowners avoid rip-offs, and Lanard Cullins, disaster inspector for the Federal Emergency Management Agency, say there are many things people can do to make sure they aren't victimized. Among their tips:
1. Get four references. Contractors will come prepared with three references. Ask for four. And for the fourth one, ask that they provide someone who had to call them back to fix a problem with the work. If the contractor fixed the problem to the homeowner's satisfaction, then you have a good idea of what kind of work the contractor does and whether he follows up until the homeowner is satisfied.
2. Take precautions if you live alone. If you live alone, have a family member or friend at your house when you meet with potential contractors. You don't want to advertise that you live alone, particularly if you are a woman or a senior citizen. Have a relative, friend or adult male acquaintance present. Before the contractor arrives, secure all of your valuables, including paperwork that could facilitate identity theft. After the contractor leaves, check all of your doors and windows to make sure they're still locked so no one can return later and gain easy access.
- On our blog, 'Listed': A tornado destroys a house in 4 seconds
"We're not saying all contractors are dishonest — the majority of them are just the opposite. It's just that some dishonest people pretend to be contractors," Howard says.
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3. Check with the Better Business Bureau. Check out potential contractors by checking not only your local bureau but also the bureaus in surrounding states. This is particularly important after large-scale natural disasters, when itinerant work crews often move into an area.
4. Verify contractors' licenses. Separate the legitimate contractors from the phonies by checking their licenses and local operating permits.
"Verify them through the secretary of state's office in whatever state they're licensed to do business," Cullins says. You should also check with authorities to make sure the contractors have complied with local laws.
5. Check contractor coverage. Make sure the contractor has proper coverage, such as surety bonds, performance bonds and worker's compensation. Howard recommends turning to your insurance agent for help.
"Wrestling with all those details on top of the devastation is a lot; your insurance agent will decipher his coverage for you," Howard says.
6. Ask your insurance agent. Another question for your insurance agent: What happens if supplies or equipment are stolen from the job site? Will the contractor's insurance cover such thefts? If so, make sure you not only obtain the contractor's insurance information but also check to make sure his insurance is in full force and is current.
- MSN Money: 10 things home insurers won't say
7. Need supplies? In an ideal situation, the contractor should buy the supplies, Howard and Cullins say. But if you do purchase them, don't give the contractor your money. Instead, meet the contractor at the supply store and make the purchase, then have it delivered to the site the day the materials are needed.
8. Deal with your insurance company yourself. In most cases, you should be the one to communicate with the insurance company, not the contractor. Cullins says some contractors will tell you they can negotiate more money from the insurer, but it could be a way to bilk you.
Howard adds that while not all contractors who communicate with insurers are scammers, the consumer should take charge of the claim. Often, homeowners have other losses associated with a disaster claim, such as loss of personal property, as well as relocation or additional living expenses, so it would not be in the homeowner's best interests to allow a contractor to deplete the total claim amount.
"Your insurance contract is between you and the insurance company, not the contractor," she says.
9. Hire an inspector. If you don't know a joist from a rafter, how will you know your contractor is telling you the truth about the work that's needed or if he's doing a good job? You have two options: your local government building-codes department or an independent building inspector. Once the contractor pulls the permits, the code inspector will check on the project to make sure it's being built to code. You can also hire a building inspector before and after the project to help you determine what needs to be done and whether it's been done properly.
10. Proofread your contract. Have a contract with start and end dates and have an attorney check it out.
"Never sign a contract without all of the blanks filled in," Howard says.
When homeowners struck by disaster lose money that was meant to replace or repair their homes, they often walk away from the whole thing, leaving the lender holding the bag. Before you compound your bad luck, make sure you're dealing with a qualified, reputable contractor. For more information, contact either the home-improvement fraud center or FEMA.
In the agreement make sure the following items are included:
1. Do not pay for work in advance, pay only for work in place. delivered on time.
2. Insure agreement requires a lien release for work paid for.
3. Include a performance delivery time (Work schedule) wit a penalty (Liquidated damages) for work delivered late.
4, Require manufactures extended warranties for such things as HVAC equipment and roofing as well as the contractors warranty for labor and materials.
5, Insure that the con tractor is Bonded (insured) for the full amount of the contract and check out the Bonding agent to insure they are lessened.
If the work is over $50,000 consider hiring an Architect or Construction Manager to protect your interest.
Most contractors are honest, but a lot of people choose their contractor based on the lowest price. You'd never do that with a car purchase, home appliances, or other purchases. You'd get what you could afford. Why is it different for contractors?
For some reason, clients think they can get the lowest price contractor and just squeeze more work out of him. Then the contractor starts charging more money and the owner wonders why.
Here is my story...............
look on FLICKR.C0M and search FORTIS CONCRETE by CKIPP1
FORTIS BUILDERS==scam artists
In the Chicago Suburban area
Just get the word out on the bad contractors
It is the insurance companies who are ripping off consumers by not be honest with what is truly in their policy much less what they are entitled to! The continue to throw money at them with a quick pay off and appear to resolve resolve their issues. When in fact they are with holding money it will actually cost to do the repairs of their home.
It is the (honest) contractors who are looking out for the home owners not their insurance company! They only want to get their bonuses at the end of the year and they can't receive that by paying out large amounts on claims.
Well said, (comments, not the article). 90% of us do more than asked, know our obligations to the homeowner and will not do the job if the homeowner wants us to cut corners. The bottom line is now and always be cost and most sub-par contractors will convince homeowners that even though their bids are 30% cheaper, the homeowner is getting just as good a job as the contractor with the higher dollar bid. Come on owners, there is a reason, (for the honest contractors) why our bids are higher and it is not just to pad our pockets. We understand our fiduciary obligation to our clients far better than the insurance companies.
I have been a contractor for over thirty 30 yrs and he we go again , Bad mouth the contractor's. Do you think we been given a bad name already with market for construction gone and my trade. Let stop and think if you walk in my shoes ,what i have done to be Lic. and insured. This all one sided for insurance to make more $$$$$$ in there pocket . Not the homeowner.
stupid people. all of you. and especially the one who wrote this crap. check this and that... will take forever. check 4 references, id, and license - that's all. keeep it simple. do not pay money, just 30% up front for materials and go with the contractor to buy it.
and best of all - you stupid consummers:
do not go to bath fitters
do not go to kitchen cabinet refacing
do not buy garage slot walls
these are legal scams. you are complanning about the contractors that are dishonest but you have the bigest thieves operating legally. $5000 for plastic bathroom??? $6000 for new doors on the cabinets??????? $10000 for slot wall in the garage????? you people are insane. talk to contractors first, few of them, and then make a decision.
and like some others here mentioned, most of the consumers are scammers, not contractors. they will not pay because the paint color is wrong, or some other little thing is not OK. this is normal among those that want to outsmart the regular, hard working guy.
After Hurricane Ike did $75,000 worth of damage to our home, we hired each job out individually. Every contractor we spoke to was incredibly nice, professional and licensed. What we heard alot of was "this job is to big. I don't have the man-power".
I think people should be more concerned with the scam artists at the insurance companies. If you don't get a "warm fuzzy" from your adjustor, ask for another one. DON"T let your adjustor MAKE you use one certain company for a repair. You have the right to choose. Read your insurance policy completely to be sure of what your policy covers. Read your first estimate and make sure you understand it, line by line. If you've hired a contractor, ask them to help you understand it. And don't sign the proof of loss form until the numbers on it are somewhere near the numbers on the estimate.
Most contractors are honest, hardworking folks. It's the ones from the insurance companies you have to watch out for. Remember, the adjustors are coming from all over the country. They aren't familiar with your area. And they will try to get away with low-balling you as much as possible, because that's what the insurance companies want them to do.
The better business bureau is worthless- they sell their ratings and automatically give better ratings to members, even ones with multiple complaints to state agencies. Check with your secretary of state- one thing to look for is what are the
latest numbers being issued- I would not hire soomeone with a number that was
recently issued unless I was familar with him/her. Remember that in many states
they do not test/license contractors they only register them so the license is only
proof they paid the state a FEE, but it does provide the consumer with additional
legal protections. Never hire an unlicensed contractor- he cannot get insursance and cannot get building permits.
One more thing. DON'T look to the BBB for recommendations. The BBB has it's solicitors call up business and tell them that they have had inquiries and since they are not a member, they don't have enough info and "you know, the first thing that callers ask, is are they a member?" You can join for "X" dollars.
Now in point of fact, Starbucks, a non-member and every other non member, gets less than top grades, which is reserved for members, even those who are brand new, insignificantly small and are of poor quality. Joe's can get a 0 grade from the board of health and have a better rating than Starbucks, who won't join.
As a legitimate contractor who is licensed and insured, I am amused and fairly sure that the article was written by or for the insurance companies in an attempt to deny and or limit claims. Certainly, one should check references, licensing and insurance converages. No legitimate contractor would disagree.
Now as to the silliness and outright BS: No contractor will meet you at the store for you to buy the building supplies (any more than a restaurateur will tell you what he pays for meat, potatoes and salt). Business people are in the business of making a profit and revealing our purchasing prices gives rise to the customer thinking ANY profit is too much and our prices are based on OUR purchasing volume, not the home owner’s one-time purchase. We are entitled to a schooled (see every business school in the world) to make a profit on each and every step of each and every job we do.
Second, The home owner buying the materials out of his pocket (instead of the contractor purchasing it with the homeowner’s down-payment) is a legally a VERY bad idea and transfers title to the homeowner at time of purchase and makes the home owner liable for the loss of destruction of the materials to thieves and vandals, whereas when the contractor buys the materials, they are his responsibility till affixed to YOUR property.
Asking the insurance agent for a contractor recommendation is probably the worst thing one can do and costs the insurance companies billions and raises our premiums. The agent refers to a buddy who kicks back to the agent. Not having a contractor with you at adjustment, usually results in a smaller insurance settlement as many items of damage are overlooked without a trained contractor’s eye to point them out.
It is a good idea to higher engineers and inspectors but they are costly and the homeowner pays the cost, whereas the professional contractor, who has a monetary interest in doing the job, tends to be pretty good at pointing out the same problems, at no cost to the homeowner. These are the same insurance companies that prefer you take their word for it when your wife is killed due to the malpractice of a drunken physician, rather than hiring a lawyer, on a contingency.