5 Steps To Avoid Contractor Scams


By Peter Schick

Finding a contractor who is skilled and able to stay within your budget can be a daunting task.  Determining their availability, checking a contractor’s reputation, and ensuring their legitimacy are all essential steps, especially for large projects.  With the all required work before a project even begins, homeowners can easily overlook critical details that can create serious issues later on.  To prevent yourself from being a victim, follow these simple five steps:

1. Red Flags to Avoid:

If a contractor displays any of these traits, you should immediately disqualify them from working on your project.

  • They want you to pay upfront.
  • They are going door-to-door claiming a “today only” deal or “just happened to be in the area”. With this, they will attempt to create a sense of urgency and get you to impulsively agree for them to do work.  They may even say that if it is not done that your safety maybe in jeopardy.
  • They lack professionalism. If they come in an unlabeled car, no business card, or you just have a “bad vibe” from them.  They may have an out-of-town area code or a PO Box instead of an address.

2. Research Contractors:

This is the most important step. Ask friends, family, and neighbors for recommendations for contractors who are skilled in the work you need done.  Once you have a dozen potential contractors recommended, do research online.  Check their reviews and their standing with the local Better Business Bureau or Better Contractors Bureau.

  • Select the best six potential contractors and call them up and ask for references and examples of past work. Also ask for proof of general liability insurance and workers compensation insurance.  This will help protect you from liability in the event one of the workers gets injured on your property.  Ensure these contractors are also licensed.  Depending on where you live, certain specialties require licensing while others do not.  Check with your county and state licensing authorities to determine if your contractor has required licensing.
  • From these six potential contractors, select the three you are most comfortable with. Ask them to provide you quotes for your proposed project.  At this point, if you have not already, meet the contractor in person.  Trust your gut feeling when you meet them.  If they are unprofessional or make you feel uncomfortable you should consider not hiring them.  Be wary if a quote is unusually low compared to that of the other contractors, they may cut corners that will impact the quality of your project or may overcharge you in later stages of the project.  Select the contractor who you feel is the highest quality for the best price.  Of note: do not pay your contactor anything until after you are done with step 3.

3. Get Everything in Writing:

Once you have selected a contractor that you feel is the highest quality at the best price it is time to hash out the details of your project. Start from big to small.  Determine the project schedule with certain milestones to be met on specific dates.  From this you will be able to determine a payment schedule to your contractor.  Do not pay them their final payment until you are completely satisfied with their work and have received a lien release from his subcontractors and suppliers.  Also discuss what permits will be needed before work begins.  If your contractor is reluctant to get the necessary permits for your project, this is a red flag.  At this point you should determine who is going to buy the supplies necessary for your project.  If you are able to, buy the supplies yourself since many contractors will often up charge you on supplies they buy.  Finally, get whatever warranty they guarantee in writing as well.  Of note: your contractor may ask for an upfront payment/draw.  If this upfront payment/draw is more than 20% of the overall price, this could be a red flag and be indicative of financial issues with the contractor.


4. Monitor Your Project:

Now that you have selected your contractor, agreed to a timeline with milestones and payment schedule, see eye-to-eye on needed permits, understand who is buying supplies, and have the warranty agreed to in writing, it is time to start the project! Ask for periodic updates from your contractor to ensure they are still on schedule.  At times, unforeseen events may impact the price and the completion time of the project.  Take this into account.  Changes in the scope of the project can have a significant impact on the price and schedule too.  Get these changes in writing and record the additional cost of implementing these changes.  Of note: the more changes you make to the project once it has started, the more likely your contractor will not be able to remain within the timeline and budget.  Request receipts from your contractor as they make purchases or pay subcontractors in order to monitor how closely they are staying within budget.

5. Final Inspection and payment:

Once your contractor tells you everything is done, do a physical inspection of EVERYTHING. Point out any deficiencies or issues and have them corrected before you give them final payment.  Ensure that they totally clean up the work site.  Get receipts for all the work that has been done and get a lien release from their subcontractors and suppliers.  Leave a review based on your experience on relevant websites to assist others when they selecting a contractor!  Of note: The most important take away from this step is not to pay your contractor until everything is done to your standard.

Doing your research upfront and communicating effectively with your contractor can prevent many issues.  Your involvement throughout the process and holding your contractor to your standards cannot be ignored.  Best of luck with your future home projects!


Helpful Resources:

Better Contractors Bureau

Better Business Bureau

Consumer Reports

National Association of the Remodeling Industry




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