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How to Protect Yourself from Contractor Scams

by Pete Youngs   
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Year after year, home remodeling fraud costs consumers thousands of dollars and considerable stress and aggravation. Contractor fraud is a criminal activity pulled by scam artists on consumers. They tend to prey on senior citizens and singles, taking advantage of their willingness to trust others who sound believable.

In addition to the obvious tactics, here are some things to watch out for:

  • A person soliciting door to door for repair work. Though they may seem quite knowledgeable and appear friendly, this is not a common tactic of a professional contractor. Door to door soliciting leaves very little evidence to track down scammers.

  • They claim to be working in your neighborhood and just happened to notice some sort of repair needed on your house, such as roofing, painting, or cracked portions in your driveway.

  • They offer a special price or discount claiming they are in the area and will knock off a portion of the cost due to excess materials from other contracts.

  • You may be told you must act right away to get this special discount pricing, and you may be asked to give them money up front before starting the work.

  • They offer you a discount price if you allow them to use your home to advertise their work. This makes it sound as if they are doing you a favor for a favor.

  • Some scammers offer a "free inspection" that always turns up a major repair job.

More times than not, after receiving a substantial amount of money, these so-called contractors just disappear with the cash. By the time you figure out that they are not showing up, they are long gone, and so is your money.

On the other hand, sometimes a contractor will start some of the work and then continuously try to raise the cost of the job causing consumers to be grossly overcharged. See, most people think that since they already signed a contract, they are at the mercy of the contractor. This is why it is so important to screen contractors before you hire them.

Here are some guidelines for avoiding a disreputable contractor:

  • Be cautious when someone offers you a lifetime warranty, or long-term promises.

  • Never fork over a large down payment for materials--1/3 down is the max.

  • Always insist on a properly written contract, typed, not hand written and signed.

  • Avoid any suspicious contractor whose address is listed as a post office box.

The two most important steps are 1.) to make sure to check out each contractor thoroughly, and 2.) to get a contract in writing that spells out even the smallest details. You can never do too much background checking before making a decision.

Some scam artists posing as contractors prey on victims of disasters. People who have damaged property and are struggling to get their homes repaired and are at great risk of contractor fraud.

Workers from all over the country flood disaster areas hoping for desperate people to let their guard down. After all, a contractor at your door may seem better than waiting weeks to get a contractor to help stop further damage. When you are vulnerable and desperate, that's when the scammers are most likely to come in for the kill.

Time to "Cowboy Up" to scammers!

Follow the techniques I stress in my Rehab 101 system to "Cowboy Up" to scammers. Always get the contractor's full name, address, business phone, and cell phone number. I recommend you to ask for five references from each bidder.

First, get the usual three references that most people ask for. Plus, the fourth is the contractor's material supplier. If the contractor told me he had been in business for ten years, and his supplier says he has only been buying from him for three months, this indicates a problem.

The fifth reference is a project they had to return to in order to fix something. And if the workers say they have never had to go back to a job, don't believe them. Ask the reference how the workers handled themselves as they had to come back after the job was finished.

Never hire the first person that shows up until you have compared pricing and references. You should always get at least three estimates to compare. Call your local Better Business Bureau and inquire about the person or business.

Make sure that they have enough insurance and liability coverage. If you use people without it, make sure to get liability waivers and lien waivers to protect yourself.

I never pay more than 1/3 down for a material deposit. This amount should be enough to get the job going. Asking for more is a red flag and should be avoided.

Here are some more clues that should launch huge red flags when dealing with contractors:

  • The person does not have a number listed in the phone book

  • The person goes door to door looking for on the spot work requiring money right away

  • Special prices or discounts are offered but you "must act fast"

  • They offer you a good deal, so they can advertise our work using your home as part of their advertising

  • The worker asks you to pull any permits required for the job

  • And my favorite--if you pay me in cash, I can give you a great discount

  • Remember the part about having leftover materials from another job and passing the savings on to you?

More red flags are low-ball offers, sub-standard materials, and any funny sounding payment plans. Stick to using contractors whose references check out and remember--if it sounds too good to be true...

Now don't get me wrong; I am not saying that all contractors are crooked. I was a reputable contractor for 20 years and most contractors are honest, hard working ladies and gentlemen. But there are thousands all over the country giving good contractors a bad name.

But, you can get information on how to protect yourself from scams by contacting your local police, and there is a great deal of information on the Internet.

About the Author:

Pete Youngs is a successful investor, business owner, author, and lecturer dedicated to helping others become successful real estate entrepreneurs. His expertise is teaching people how to rehabilitate properties for a fraction of the normal cost.

His knowledge and ability to get the highest quality results for the lowest possible price earned his companies prestigious renovation contracts, such as the living quarters at the 1996 Atlanta Summer Games, Courtyard By Marriott Hotels, and hundreds of single and multi-family homes nationwide.

Pete shares his contractor knowledge with investors and homeowners alike, teaching them how to put THOUSANDS OF DOLLARS into their own pockets, instead of spending it on unnecessary inspections and contractors.

 
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