How To Avoid a Home Improvement Scam

Adding a room, renovating a basement or doing some much needed repairs around your home can be a big undertaking. Finding a trustworthy contractor is an important first step. Scammers will promise to do the work but leave you and your home worse off than when you started. They may do shoddy work, damage your home, overcharge you or just take your money without performing any services. So how do you tell the difference between a trustworthy contractor and a scammer? Before you hire a contractor, learn how to recognize the signs of a home improvement scam.

Signs of a Home Improvement Scam

How can you tell if a contractor might not be reputable? Here are some tactics scammers use:

• Knocking on your door looking for business because they are “in the area.”
• Saying they have materials left over from a previous job.
• Pressuring you for an immediate decision.
• Asking you to pay for everything up front or only accept cash.
• Asking you to get any required building permits.
• Suggesting you borrow money from a lender they know.

How To Avoid a Home Improvement Scam

Here are some tips to help protect yourself and your money:

• Consider only contractors who are licensed and insured. Check with your state or county government to confirm their license and ask the contractor for proof of insurance.
• Get contractor recommendations from people you know and trust.
• Check with consumer protection officials to see if they have complaints against a contractor. You also can search online for the company’s name with words like “scam,” “review” or “complaint.” Or use online rating websites you trust to see what others are saying about the contractor.
• Get multiple estimates. A written estimate should include a description of the work to be done, materials, completion date and the price. Don’t automatically choose the lowest bidder. And ask for an explanation if there’s a big difference among the estimates.
• Read the contract carefully. Contract requirements vary by state. Even if your state doesn’t require a written agreement, ask for one. Before you sign a contract, make sure it includes:
  
  • the contractor’s name, address, phone and license number
  • an estimated start and completion date
  • any promises made during conversations or calls related to issues such as the scope of work and the cost of labor and materials
  • a written statement of your right to cancel the contract within three business days, if you signed it in your home or at a location other than the seller’s permanent place of business. And, make sure all blank spaces are filled in.
• Don’t pay the full amount for the project up front. Some states actually limit the amount of money a contractor can ask for as a down payment. Contact your  state or local consumer agency  to find out the law in your area. And never make the final payment until the work is done and you’re satisfied with it.

The Home Improvement Loan Scam

Sometimes, contractors will not just scam you through the work they do — or don’t do. Sometimes, they’ll actually set up a scam that ends with a loan against your home.

Here’s how it works: a contractor calls or comes to your door. He offers a deal to install a new roof or remodel your kitchen. He says he can arrange financing through a lender he knows. After he starts work, he asks you to sign papers. They may be blank — or he might hustle you along and not give you time to read through them. Later, you find out you’ve agreed to a home equity loan with a high interest rate, points and fees. What’s worse, the work on your home isn’t done right or isn’t completed and the contractor — who may already have been paid by the lender — has stopped returning your calls.

To avoid a loan scam

• Never agree to financing through your contractor without shopping around and comparing loan terms.
• Never agree to any loan without understanding the terms of the loan and knowing whether you can make the payments.
• Don’t sign a document you haven’t read or that has blank spaces.
• Don’t let anyone pressure you into signing any document.
• Never transfer your deed to anyone without consulting an attorney, a knowledgeable family member or someone else you trust.

Report a Problem

If you have a problem with a home improvement project:

• First try to resolve it with the contractor. Many disputes can be resolved at this level.
• Follow any phone conversations with a letter you send by certified mail. Request a return receipt, so you can prove that the company got your letter.
• Keep notes and copies of letters and documents for your files.
• If you can’t resolve it with the contractor, consider getting outside help from your state attorney general or local consumer protection office.

A TRUSTWORTHY LENDER

If home improvement projects are on your to-do list, make sure you finance with a trustworthy lender. With a Home Equity Line of Credit (HELOC) from Georgia United, you have the freedom to choose when and how you want to use the funds. We make the online application process easy and our home loan consultants can walk you through each step of the process and answer any questions you have. 

Source: Federal Trade Commission. (2021, May). How To Avoid a Home Improvement Scam. consumerftc.gov

The information in this article for general educational purposes only and not intended to provide specific advice or recommendations. Please discuss your particular circumstances with an appropriate professional before taking action.