Do you have some home projects in mind? If you’re considering paying someone else to take them on, it’s important to be cautious about scams by untrustworthy contractors. Home improvement scams that leave homeowners with incomplete or shoddy work occur more often than people realize. Knowing how to protect yourself from contractor scams can save you from the heartache and frustration of losing money to unscrupulous service providers. In this article, Today’s Homeowner looks at advice to avoid becoming a victim of a home improvement scam.
How Common Are Home Improvement Scams?
Unfortunately, home improvement scams continue to happen year after year. One of the darker sides of this issue is that America’s elderly population is a significant target for scammers. However, no class of consumers is entirely safe.
The surge in home improvements and remodels that occurred during the pandemic also led to a spike in these types of scams. According to the Federal Trade Commission (FTC), the number of home improvement scams reported during the pandemic years of 2020 to 2021 was 44,000. Shockingly, over $82 million was lost to these scams during the first two years of the COVID-19 pandemic. This phenomenon has come to be known as the “pandemic peak” due to the fact that home improvement scams reported to the FTC for the years 2015 to 2017 barely exceeded 3,000 annually.
Keep in mind that scam data published by the FTC only takes into account scams that are reported by consumers. Many scams go unreported.
As we mentioned earlier, elderly Americans are more vulnerable to scammers — and this applies across all industries. Many scammers see the 55 million Americans over the age of 65 as perfect targets. A 2021 Department of Justice report shows that 92,371 scam victims over the age of 60 lost $1.7 billion to scams in just that year alone. This figure represents a 74% increase in losses over those reported in 2020.
Roofing, painting, and paving are the jobs associated with the highest number of scams. Concrete work, flooring, landscaping, electrical work, plumbing, HVAC, and tiling are all included in the home improvement scams top ten.
Signs of Potential Home Improvement Scams
How do you sniff out a home improvement scam? There are several red flags to look for. We’ll delve into these below.
Scenario 1: A contractor knocks on your door to say they’re in the area
Contractors don’t generally solicit work directly. Most gain their business through websites and ads. Door-to-door scammers will often take advantage of severe weather events to target vulnerable homeowners needing quick repairs. They might even offer you a free roof inspection. In reality, reputable contractors in your area are likely to be too busy to be knocking on doors following a storm that has caused damage around town.
If a contractor approaches you to see if you need work done, always ask for a card or contact information that will enable you to research them online. Never agree on the spot to allow them to do work.
Scenario 2: A contractor demands a large down payment to complete the job
While it’s not uncommon for contractors to ask for down payments to be able to purchase materials, these payments should represent no more than one-third of your entire project cost. If a contractor asks for a large lump sum up front, this may be a sign that they are planning to make off with the money without completing the job.
Scenario 3: A contractor is willing to offer you a great rate on a “surplus of material” from a previous job
Why is this a red flag? First, it’s possible that the material doesn’t even exist. The scammer may simply be trying to get you to write a check. It’s also possible that the material is stolen or counterfeit. If the material being offered is roofing, it’s possible that the contractor is trying to sell you used roofing shingles pulled off of another house.
Scenario 4: A contractor says a decision must be made now to get the job done
When contractors place time-sensitive offers on the table, this is a high-pressure sales tactic. They’re attempting to get you to agree to work while you’re under duress. They may be hoping that you’ll sign a contract before you can research their background, get other quotes, or change your mind. No reputable contractor would confront a client with ultimatums.
Scenario 5: A contractor says they will handle the financing for you using their preferred lender
There are two ways this scam can go. In some cases, homeowners find out after the fact that they’ve signed documents for a high-interest home equity loan. In other cases, the contractor may simply flee after being paid in full by the lender.
While some reputable contractors offer financing as a way to make home projects more affordable to customers, they never insist that a customer use their lender. If your contractor does offer you financing, never accept it before shopping around for better rates and terms. If you do agree to financing, make sure you read through every line of the contract carefully without allowing yourself to be rushed.
Scenario 6: A contractor only accepts cash
A scammer might insist on cash to cut down on the paper trail.
Scenario 7: A contractor asks you to get the building permits
If your contractor insists that you pull permits for a project, it’s probably because they’re not properly licensed for the type or scope of work needed for the project. A permit should always be the responsibility of the contractor.
Scenario 8: A contractor tries to talk you out of going through an insurance company
If you were planning to use your homeowner policy to cover damage to your home, you might be surprised to find that your contractor is telling you to pay without going through insurance. If this happens, it’s likely that the contractor isn’t licensed or insured to do the work they are being hired to do.
Unscrupulous contractors will also sometimes try to get homeowners to misuse their insurance policies — a common example is when a contractor says they will help you avoid paying your deductible by providing you with an estimate that’s higher than the true cost for the repair. The contractor will then use the excess funds paid out to cover your deductible cost.
Unfortunately, sending false information about the cost of repairs to an insurance company is fraud. What’s more, contractors willing to waive a deductible are likely to make up for the difference by cutting corners during the project.
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