After a natural disaster, scammers are eager and adamant to target homeowners with post-disaster damage. In desperate times, it can be easy to fall victim to shady contractors who overpromise and under deliver. Having to avoid shady contractors in the wake of a natural disaster is a common experience for a homeowner. Con artists and fraudsters can be sneaky, but if you are aware of the red flags up front, you will be able to protect yourself, your house, and your money.
How do fraudulent contractors operate?
Fraudulent contractors scam businesses and people by offering to do repairs and requesting payment up front before the work is done. Once they get your money, they ditch the job. If they complete the job, it will not be done properly and might even need further repairs, which will cost you more money. Shady contractors are usually active year round, but the Federal Trade Commission has seen an uptick in shady business practices after a storm hits.
The most common scams and how to avoid them
ASKING FOR AN UPFRONT PAYMENT
It is a red flag if any contractor you are dealing with asks for all the money up front. Your contractor might use this as an excuse to use this money to cover the cost of supplies and equipment. Contractors who ask for upfront payments often disappear or do poor work.
The Better Business Bureau recommends that homeowners pay no more than one-third of the full cost upfront. Also, keep in mind that contractors who ask for a payment first will often use pressure tactics to get you to comply. Never use a contractor who is pressuring you or scaring you into employing their services.
HOME IMPROVEMENT SCAM
These people are usually selling something or promising you a loan. They will usually knock on your door for business offers or discounts. Once you open the door, they try to pressure you into an immediate decision. They only accepts cash or suggest you borrow money from a lender the contractor knows. If the person at your door says that the offer will expire or you will no longer be able to get it – this is a sure sign of a scam.
HOME IMPROVEMENT LOAN SCAM
A contractor will call or come to your door. They offer to install a new roof or remodel your home. They say they can arrange a financing plan through a lender they know. Then they hustle you along and do not give you time to read through the paperwork. Later you find out you’ve agreed to a loan with a high interest rate, points, and fees. You may have put your home down as collateral. What’s worse, the work on your home isn’t done right or isn’t completed, and the contractor has disappeared.
HOW TO AVOID THESE SCAMS
Do not sign any documents under pressure or in a hurry. You always have the right to take your time and read and understand everything.
Do your research first. Get different quotes before settling for the first offer. Commit to getting at least three bids from three different companies you have investigated.
Ask questions about their services. Below are some questions you can ask.
- How many projects like mine have you completed in the last year?
- Will my project require a permit?
- May I have a list of references?
- What types of insurance do you carry?
- Will you be using subcontractors on this project?
Know your payment options
Understand your payment options. The first tip is to never pay cash. Typically for large projects, you will arrange a financing plan. Try to limit your down payment. Some state laws limit the amount of money a contractor can request as a down payment. Payments should not be due until the contractor has started the project. Usually, payments are made in stages – a payment at the beginning, another payment in the middle, and a payment at the end when all the work is done. This way, if the work isn’t going according to schedule, the payments to your contractor also are delayed.
Always a written contract agreement including who, what, where, when and the cost of the project. All the details of your project should be written down, and you should understand and agree to the details.
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
- The payment schedule
- The contractor’s obligations
- How change orders are scheduled
- Information on warranties
- A detailed list of all materials
- What the contractor will and won’t do
After you hire a contractor
- Keep all records: Save all the paperwork related to your project including the contract, change orders and payments.
- Keep conversations: Keep a log of all phone calls, conversations and activities. You might also want to take progress photos.
What do you do if you are a victim?
If you have a problem with a home improvement project, first try to resolve it with the contractor. If this does not work or you cannot get in contact with the contractor, consider getting outside help. You can use your state attorney general or local consumer protection office, your local home builders association, your local media’s call for action lines or dispute resolution programs.
If the fraud has already occurred, it may be in your best interest to talk to an attorney. Legal remedies may be available. If you believe the contractor’s actions involve criminal activity, inform your local law enforcement.
To find builders, remodelers, and related providers in your area that are members of the National Association of Home Builders, visit nahb.org. To find detailed information about a builder, service provider, or remodeler in your area, contact your local home builders association
If you or a loved one are experiencing abuse and need assistance, self-help resources are available via www.texaslawhelp.org. If you or a loved one are in need of an attorney or would like to explore other resources, you can visit the Texas Crime Victim Legal Assistance Network.
Lone Star Legal Aid is a 501(c)(3) nonprofit law firm focused on advocacy on behalf of low-income and underserved populations. Lone Star Legal Aid serves the millions of people at 125% of federal poverty guidelines that reside in 72 counties in the eastern and Gulf Coast regions of Texas, and 4 counties of southwest Arkansas. Lone Star Legal Aid focuses its resources on maintaining, enhancing, and protecting income and economic stability; preserving housing; improving outcomes for children; establishing and sustaining family safety and stability, health and well‐being; and assisting populations with special vulnerabilities, like those who have disabilities, or who are elderly, homeless, or have limited English language skills. To learn more about Lone Star Legal Aid, visit our website at www.lonestarlegal.org.
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