Remodeling your kitchen, renovating your bathrooms, fixing your roof—Americans spend over $150 billion on home improvements and repairs every year, according to the National Association of Home Builders. That’s a lot of money, and a lot of opportunity for scammers to take advantage of you. Millions of dollars are lost each year because of home improvement scams. Older adults can be particularly vulnerable if they believe a contractor knocking on the door may be a good samaritan. And if the “good samaritan” is particularly charming or pushy, it can be difficult to say no, says Cheryl Reed, director of external communications for Angie’s List, a website that helps you find reputable contractors.
Read on for tips on how to keep your home and your money safe.
1. Know the signs
Whether you need a small repair done or a large home project undertaken, watch out for these red flags when hiring someone to make the fixes:
- A knock on the door. Be skeptical of anyone who knocks on your door and offers to make repairs, trim trees, or do other repairs. “Companies who have great reputations, who do work properly, don’t go door to door,” says Reed.
- Pressure to make an immediate decision. You should always have the time and ability to do your homework before hiring someone to do home repairs. A contractor should never bully you or make you feel uncomfortable, Reed says. “A deal today should be a deal tomorrow.”
- A contractor who claims to have leftover materials from another job that he can use for your home. Many scammers use this tactic, but the truth is, the contractor didn’t just come from another job and the materials are most likely sub-par. What the person is trying to do is take your money, do a job that may cause more damage rather than fix the problem, and disappear before you realize it.
- Someone who will only accept cash. While some reputable contractors will offer a cash discount, they also accept credit cards and checks. In general, cash payment should be a red flag. The other benefit of paying by credit card is that it gives you documentation and a recourse if something goes wrong and you have to stop payment with your credit card company.
2. Do research
Even if you’re in a hurry to get something repaired, take the time to check the background of the contractor. “Your instinct is to get it done now, but be patient,” Reed says. Quickly hiring someone who does the job wrong could cost much more in the long run. Read reviews on sites like Angie’s List and Porch.com to find reliable contractors in your area and talk to past customers. Calling customers from five or 10 years prior will let you see how the contractor’s work holds up, says Reed. You should also check your local Better Business Bureau to see if the contractor or company has any complaints against them.
Lastly, be sure the person you hire is licensed, bonded, and insured. Ask for their insurance certificates and license numbers, and check appropriate agencies (like a state contractor’s license board) to ensure the certificates are valid. (Another telltale sign of a scam: The contractor should have permanent lettering on trucks, business cards, and have a physical address, according to the BBB. If they don’t, be wary.)
3. Get estimates
Get written estimates from multiple contractors before entering into a contract with one. The more documentation you have, the better protection you have in case things go wrong. Reed recommends getting at least three bids from contractors whom you’ve already researched and determined have the proper licenses and insurance. That way you have information to compare prices and how long the job should take. Being specific about what you want done also helps, says Reed. Instead of saying, “I want to update my kitchen,” say, “my kitchen is this size, I have these appliances that I want to keep, but I want to paint, or tile, or expand,” Reed says. The New York Department of Financial Services has a handy checklist for choosing a contractor here.
4. Get a contract
Make sure everything is in writing before a contractor starts work on your home. Read over the contract carefully and ensure that you understand it. A good contract should be clear and include exactly what work will be done, the materials that the contractor will use, and a price breakdown, according to the BBB. “Never sign a blank contract, and know all the details as well as how any change orders will be handled,” Reed says. It’s always great to have an early termination clause. “For example, a clause that states ‘if the terms of this contract are not met we can dissolve without penalty to either side’ gives you extra protection.”
5. Don’t pay the total cost upfront
Many scammers will insist you pay the full amount for a home repair upfront, and then will disappear or perform substandard work. The BBB recommends paying no more than 30 percent of the total cost in advance. “It’s okay to give a down payment, especially when the materials are hard to get or need to be custom ordered,” says Reed. If it’s possible, try to “tie payment to progress,” she says. Pay the down payment before work begins, a second installment after the job is done, and “hold back at least 10 percent if not more to give that when you are happy and the job is completed.” Also make sure you inspect the work very carefully before handing over the rest of the payment.
What to do if you’ve been scammed
If you think you’ve been a victim of a scam, you can get help and report it to your state’s attorney general’s office, which can investigate and coordinate law enforcement against a business. Find yours here. You can also contact the Federal Trade Commission and file a complaint. There may be time limits to pursuing legal claims, so don’t wait to report and contact a lawyer. Sixteen states have contractor-related recovery funds that may help you recoup some money lost due to a scam. These states are: Alabama, Arizona, Connecticut, Florida, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, North Carolina, Tennessee, Utah, and Virginia.