Preventing Home Improvement Fraud

Table of Contents

• Introduction
• Beware: Seniors most at-risk
• Signs of fraud
• Questions to ask
• How to protect yourself
• Organizations that help
• References

Introduction

A home improvement project can be overwhelming, and hiring a contractor often helps to ease the tension. However, scammers sometimes appear and offer their services for what sounds like a good deal, only to take the money and run. It’s estimated that anywhere from 20,000 to 100,000 scammers make attempts every year on homeowners, some with great success to the detriment of others.¹ In 2011, consumer protection agencies recovered almost $147 million from contractor scams in 22 states.² This money could have been protected in the first place had homeowners taken simple steps to check these contractors.

The key in any remodeling situation with a contractor is to take steps to protect you and to not rush into the contracting job. If you vet the contractor and don’t hand over cash before the contracting deal starts, you will stand a better chance of not being scammed and getting a good remodeling job done for the right amount of money.

Below are some resources to help you prevent personal home improvement fraud. You can also find more information on organizations and groups that help those dealing with home repair scams and who to contact if you feel approached by a fake contractor.

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Beware: Seniors most at-risk

Seniors are the most at-risk when it comes to fraudulent contractors and home improvement scams. Why are they preyed upon more than other types of homeowners? First, seniors own more than half of all the financial assets in the United States, making them prime targets. 30 percent of all scam cases in the United States list seniors as victims. Research shows that seniors are more susceptible to scams than other age groups, either because they’re more open or polite.³

In terms of fraudulent contractors, the US Department of Health estimates that 60 percent of the elderly live in homes 20 years or older. These homes usually need updates and renovations like walkways and other improvements for better accessibility.⁴ As such, when a fraudulent contractors comes to offer a deal, seniors do not ask as many questions or complete background checks because they need the work done. When they realize they have been duped, they will often not report it for fear of shame or being put in a home. If they do decide to report the home improvement scam, they will usually remember fewer details about the crime.⁵

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Signs of home improvement fraud

The most common types of home improvement fraud include: 1) intentionally providing false information; 2) receiving payment but not providing the remodeling services; 3) changing the terms of the contract and increasing the costs, and 4) publishing false advertising.⁶ Most often, these scamming home improvements will start with someone appearing at your door, offering to do work on your home like spray the roof, coat the driveway or fertilize the lawn with tools they had leftover from another job in your neighborhood.⁷

Some other warning signs for home improvement scammers include:

• Offering discounts for finding other customers
• Having materials left over from a previous job
• Only accepting cash payments
• Asking you to get the required building permits
• No business number in the local telephone directory
• Your remodeling job will be a “demonstration”
• Pressuring for an immediate decision
• Offering exceptionally long guarantees
• Asking for the entire payment upfront
• Suggesting borrowing money from a lender the contractor knows⁸

If one or more of these warning signs come up in your initial conversation, then you need to politely respond “no” to their offer and consider warning your neighbors about these suspicious contractors going around offering these services.

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Questions to ask

Once you choose a contractor for your remodeling job, there are questions you should ask him or her concerning their business and building practices. While this list is not meant to be all-inclusive, it should give you an idea of the sorts of questions to ask when it comes to learning more about the contractor and the work they will be doing for you.

Business identity:

• How long has the firm been in business?
• What is their permanent business address?
• Is the prospect licensed to work in your area?
• What year was the business initially licensed?

Business practices:

• How does the company ensure warranty service complaints are effectively handled?
• In case of any accident, is the company insured against workman’s compensation claims, property damage or personal liability?
• How does the company maintain good customer relationships throughout the construction and warranty period? (applicable in longer projects)
• What will the payment or draw schedule look like (applicable in longer projects)

Building practices:

• Who will be assigned as the project or site supervisor?
• Who will be your contact if that person is not available?
• Will there be a supervisor on the site full time?
• Will they be providing a written construction schedule?
• What’s the company’s routine regarding regular meeting with the homeowners during construction?
• Who will attend those meetings? Will the builder personally attend every meeting?
• Can I expect to see workers at the site every day?
• Does the builder plan to stay personally involved in the project at all points?
• May I have the names and numbers of five homeowners you’ve completed projects for?
• May I visit a site where work is in progress?

A visit to a site in progress can reveal much about a company’s ability to manage a large project. Notice how organized it looks. Is it messy and chaotic or does it seem well-organized with workers moving like they know what they are doing.⁹

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How to protect yourself

Should you choose to go forward with the contractor, consider these steps to protect yourself from home improvement fraud:

• Take the time to think through decisions.
• Don’t allow anyone to rush them into a “deal” or signing a contract.
• Always get a written contract.
• Shop around. Get more than one estimate and/or ask a trusted friend to review the options before deciding.
• Make final payment when the work is completed to satisfaction.
• Review how their family will handle the situation of someone coming to their door to sell a home repair or remodeling service.¹⁰
• Know what you want before you agree to the job.
• Keep it local.
• Ask for references from previous jobs.
• Check with the Better Business Bureau for their rating and any complaints against them.
• Verify their license and that they’re insured.¹¹

Most importantly, if the remodeling job doesn’t feel right to you, then you should not proceed. You have a three-day window after discussing the project with the contractor to rescind, and it is completely within your consumer rights to do so. So do not hesitate or be intimidated by the contractor if you feel uncertain about the project and want to rethink having it done.

For more information on preventing home improvement fraud, see these sources:

• AARP, Home Improvement Contractors Fact Sheet
• US News & World Report, How to Spot a Home-Contractor Scam
• MSN Real Estate, 10 ways to avoid contractor scams
• FEMA, Avoiding loan scams after a natural disaster
• Cooperative Extension Service (UIUC), Home Repair Fraud

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Organizations that help

If you feel like you encounter a fraudulent contractor or are a victim of home improvement fraud, there are a variety of organizations and federal groups you can get in touch with for help. The National Center for the Prevention of Home Improvement Fraud (NCPHIF) is one group that helps homeowners get the right help and avoid fraud by providing them with a step-by-guide on remodeling projects and how to protect against fraudulent home improvement claims.

The Better Business Bureau (BBB) is another resource that homeowners should utilize when hiring a contractor to do remodeling work. They have a database of contractors who are licensed in the United States, with information on ratings and complaints. It’s a good way to check on your contractor and see if they’re the right one for the job you need done on your home, or if they’ve done poor work in the past or less work for a higher price.

You can also contact your local FBI branch if you feel victimized by a home improvement fraud. You can find a complete list of branches in the US and get in touch with the one closest to you. The National Consumers League (NCL) also has a fraud website where you can stay informed on current fraud scams in the United States and submit a scam tip to them.

Call for Action is a non-profit organization that also investigates fraudulent contractors, with local offices across the United States. It takes tips from consumers, puts out publication, and organizes various projects as part of its campaign towards action against issues in the United States including home improvement fraud. Please contact them if you are concerned about a fraudulent contractor and have a chapter in your area.

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References

1. “ How to Avoid Home Improvement Scams“. Reader’s Digest. Retrieved 2013-09-16.
2. Thomas, Alexander. “ Avoid these 5 home improvement scams“. HLNTV. 2012-11-13. Retrieved 2013-09-16.
3. “ Senior Fraud Initiative“. Retirement Industry Trust Association. Retrieved 2013-09-16.
4. Bruce, Benjamin. “ Scams That Target the Elderly“. GP Solo Magazine. Retrieved 2013-09-17.
5. “ Elder Fraud – Leader’s Guide“. Consumer Action. 2012-10-15. Retrieved 2013-09-16.
6. “ Home Improvement Contracts and Fraud“. Before It’s News. 2013-02-27. Retrieved 2013-09-16.
7. “ Home Improvement Fraud“. National Association of BUNCO Investigators. Retrieved 2013-09-16.
8. FTC. “ Hiring a Contractor“. Federal Trade Commission: Consumer Information. Retrieved 2013-09-16.
9. Lupberger, David. “ How to Avoid Getting Scammed: Get it Right“. HomeAdvisor Resource Center. Retrieved 2013-09-16.
10. Fox, Linda Kirk. “Home Repair Fraud“. University of Idaho Cooperative Extension System. Retrieved 2013-09-16.
11. “10 Tips to Prevent Home Contractor Fraud“. Ameriprise. Retrieved 2013-09-16.

1 Comments

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