Fake Home Contractor Scams to Avoid

Contractor talking to a customer in their home

Most homeowners will need a contractor at one point or another. Whether it’s a new bathroom, replacing the kitchen cabinets, or fixing the deck, you want the work done right at a good price. Unfortunately, it can be hard to find a contractor you can trust, especially when there are scammers out there looking to take advantage of you. A study by JW Surety Bonds found 1 in 10 Americans have fallen victim to contractor fraud. The scammer may do the work quickly with low-quality results, provide a very low estimated cost and then significantly increase the price by the end of the job, or fail to perform the work altogether.

Here are 3 common home contractor scams to be aware of and some tips to avoid falling victim to these scams.

The Door-to-Door Scam

This common scam starts with a knock on the door or a flyer. The scammer claims to be working in your neighborhood on another project. They may say they have leftover supplies and can give you a deal on building a deck or replacing windows, for example. The scammer may offer a low price and a short timeframe or pressure you to hire them immediately to get a discount. Once they start on the work, they may "find" issues that significantly raise the price or they may accept your upfront deposit and never return to do the job.

The “Free Inspection” Scam

In this scam, a contractor calls or knocks on your door and offers a “free inspection.” The scammer tells you they noticed a problem with your home that needs repair. They offer to inspect the issue at no cost and then provide a quote. When you agree to let them do the work, they demand full payment up front or a large deposit. They often ask you to pay in cash or through an uncommon payment method such as an online money transfer or prepaid debit card. Once again, they walk away with your funds and never complete the job.

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The Post-Disaster Scam

This scam is common after a heavy rainstorm, tornado, or flood that causes damage to homes. Scammers will visit homes affected and offer to fix the damage. They will say they can handle the insurance claim and payment for the homeowner but pocket the insurance money to repair the damages and never complete the work. Not all contractors that contact you will be scammers, but enough are that you should be cautious, especially following a natural disaster.

How to Avoid Falling Victim to a Home Contractor Scam

  • Make sure the contractor is licensed and insured. You can confirm a contractor’s license with your state or county government and ask the contractor for proof of insurance. You can also request references from past work.
  • Ask people you know and trust for contractor recommendations.
  • Research them online. Check to see if they have a website or social media presence and read customer reviews online to see what others are saying about the contractor.
  • Search online for the company’s name with words like “scam” or “complaint.”
  • Get more than one estimate. Ask for an explanation if there’s an estimate that is significantly lower than the others.
  • Beware of “fast talkers” that show up at your door with a deal that seems too-good-to-be-true or tries to pressure you into making a quick decision. Unless it’s an emergency situation, a decision probably doesn’t need to be made that quickly.
  • Don’t obtain the work permits yourself - this may be a sign the contractor is not licensed.
  • Ask for a contract and review it carefully. Make sure it includes the contractor’s name, address, phone number, and license number, an estimated start and completion date, a detailed scope of work that includes what was discussed in conversation, and the cost of labor and materials.
  • Don’t pay the full amount for the project up front and be wary of a deposit that is more than 30%. (Some states actually limit the amount of money a contractor can ask for as a down payment.) Don’t make the final payment until the work is done and you’re satisfied.
  • If you come into your bank or credit union to make a large cash withdrawal, the employee may ask questions. Be open with your trusted banking & financial partners in these situations, so they can make recommendations or suggestions that may help protect you and your hard-earned savings. A Citadel representative recently saved a member from handing over $20,000 to a scammer by simply asking questions and letting the member know about their concerns.

Following these tips will help reduce your chances of falling victim to a costly home contractor scam.

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