Six Common Contractor Scams (and How to Avoid Them)

Anyone can be deceived. Even if you think you know enough about things, you can be deceived – perhaps especially because you think you know enough about things. Because of our desire for goods and services and our determination to get a good deal on those goods and services, we can all be vulnerable to a good scam.

As you may have noticed, owning a home is expensive, which can make homeowners especially vulnerable to scammers . And hiring contractors can be a stressful and stressful process . You might think this would make it harder to fall for contractor scams since we usually go into these relationships with our mustaches already raised, but people fall for contractor scams all the time —about 10% of Americans have been affected by contractor scams. , losing an average of $2,426 . While you may think that scammers are obvious and easy to avoid, that may only be because you haven’t been scammed yet.

Destruction of the access road

Scam: You hire someone to fix your driveway – maybe they showed up at your door with a great deal, or maybe you found them online. Either way, they get to work and destroy the existing access road. Then, once your driveway resembles the surface of the moon, they announce that the cost will be double the original price or more. If they are polite they will find some excuse as to why the price has gone up, but either way you are in the same place: you either pay or you don’t have access.

Why it’s easy to fall for: It’s just so… blatant. Having your home foreclosed on is often completely unexpected, but they know that once your driveway is destroyed, your only alternative is to hire a second contractor for even more money.

More materials, more problems

Scam : A contractor shows up at your door saying they work in your area and have materials left. To get rid of them and make their stay in your area more profitable, they will be happy to work in your home for a big discount (since they already have the necessary materials). They negotiate a perfectly reasonable deposit and disappear – or spend the day doing really shoddy work and leave you in a mess.

Why it’s easy to fall for: Like all great scams, it combines a perfectly reasonable scenario with your own desire to save money. Plus, having a friendly person at your door puts you at ease because you feel like you’ve made a connection.

“Fast” deal

Scam: The contractor offers you a good deal on a project, but only if you sign the contract and pay a deposit immediately. Once you do this, they will leave and never return.

Why it’s easy to fall for: Lack of time is a common psychological trick used by scammers. And it’s common because it works—it triggers a primitive response in our brain that causes us to make decisions we wouldn’t normally make. This is one of the reasons why people often feel a sense of disbelief that they have fallen for such a scam: once the time pressure is eliminated, we begin to think rationally again.

Outright insurance fraud

Scam: You tell the contractor you can’t afford the project, but he has a useful idea: insurance. They tell you that they will ask your insurance company to cover the project; just let them deal with it . What happens next is one of two things: your contractor literally commits insurance fraud on your behalf by making up a covered event, or he files a claim and gets paid by the insurance company but never actually does the work.

Why it’s easy to fall for: Scam contractors always treat us like friends who are just trying to help us, and legitimate contractors often deal with insurance companies on behalf of homeowners. It’s always a good idea to monitor any communication between your contractor and your insurance company and double-check any claims the contractor makes as to what is covered.

My friend is a creditor

Scam: We’ve all had that moment when a contractor gives us a quote and our souls briefly leave our bodies in shock, but that contractor has a solution. They have a lender that they often work with that will offer a great rate to finance the project, and the contractor will offer a discount if you use them. The contract you sign with the “lender” essentially provides a loan against the home , and the contractor disappears.

Why it’s easy to fall for: Financing home renovation and improvement projects is quite common, but everyone is afraid of hassle and paperwork. When a contractor makes things easy for us, we are grateful and may not do our due diligence.

Free inspection!

Scam: A contractor knocks on your door and offers to inspect certain aspects of your home for free . They may claim that they can see from the street that your roof, windows, air conditioning unit, or other part of the house is old and has some wear and tear. The contractor then magically discovers an emergency and may even deliberately damage your home to force you to hire him to do the job. After paying the deposit, they leave “to get materials” and never return.

Why it’s easy to fall for: You figure that if the inspection is free, there’s no risk, and you ignore them because you’ll get the information and then you can shop around for a better deal to fix it. You don’t expect the sudden pressure to make a decision right there because they’ve discovered a very bad, no good situation that threatens your home or family – and you certainly don’t expect the roofer to show up, for example. down from your roof, holding a bunch of tiles that they literally tore off on purpose.

How to protect yourself from contractor fraud

Since we’re all human and our brains can be hacked, anyone can fall for a scam, but there are steps you can take to protect you from most contractor scams:

1. Always do your research. Never hire a contractor without doing your research first. No matter how good an impression they make when standing in your door or making an offer, do your due diligence every time. Ask them for license and insurance information, then use your state’s license check website to make sure they are legal.

   You should also ask and check their references to ensure they have completed projects and have satisfied clients. If they can’t provide them or you can’t contact them, think twice.

2. Never sign right away. If you are forced to sign a contract and/or pay a deposit to close a deal or make an appointment for work, walk away. Even if it’s not a scam, it’s a contractor you probably don’t want to work with.

3. Keep track of your deposit. Many contractors want to put down a deposit before planning or starting work, and typically anywhere from 10% to 33% isn’t crazy, depending on the overall cost of the project. But more than that, it should give you pause because you want to have some leverage if things go wrong. And some states have limits on how much a contractor can charge, so check your local rules before agreeing to anything.

4. Never pay in cash. If the contractor insists on a cash deposit, politely show him the door. A credit card offers much greater protection against fraud, although some contractors do not accept it because of the fees associated with it. But even a check is a better option than cash because it at least establishes a paper trail.

5. Always get your own financing. Just as purchasing a car loan is always a good idea, you can almost always get a better deal on financing home renovation or home improvement projects yourself. And by not using the contractor’s “recommended” financing, you eliminate any risk of being ripped off.

6. Trust your intuition. Legitimate contractors will outline the project, give you a clear cost, and then give you time to think and ask questions. If you feel pressured, confused or afraid during a conversation with a contractor, walk away, even if it seems like it makes sense.

If you have been deceived by a contractor

So what happens when a fast-talking scammer catches you at the wrong time and scams you out of some money for a renovation or project that he’s obviously never going to do? There are several basic steps that need to be taken:

• Contact law enforcement. File a report with your local police. Even if they never identify or catch the fraudster, having a record of fraud may be helpful to you if you need to file an insurance claim. You should also contact your state’s Attorney General’s Office and file a report.

• Consult a lawyer. You may be able to sue the scammer if you can find him and prove that he scammed you. Talking to an attorney can give you some insight into your chances and outline a path forward.

• Contact your insurer. Your homeowners insurance may cover at least some of the financial loss, and if a scammer damages your home as part of their scheme, you may be covered for that as well. Talking with your local insurance agent is a must.

• Consult a (legitimate) contractor. Just because you got scammed doesn’t mean your home doesn’t need repairs, and sometimes scammers accidentally or purposefully damage a home while doing their “job” (or they do part of the job, and not particularly well). Don’t think that your financial loss is the end of your troubles – find a real contractor to see if you really need the job.

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