At the beginning, we have to state that only a small percentage of contractors are bad apples. Those who are will cost you large in time and money. Fortunately, scammers and con artists are pretty easy to spot as long as your desire to save money doesn’t stop you from seeing the telltale signs.
The following identifying red flags for Avoiding Contractor Scams are pretty easy to spot:
1. No Office – A contractor should have an office somewhere, even if it’s room in his home and a reference to a local bank and accounts with local suppliers. Even if you do not visit him in the office ask for a recommendation from a local supplier or two.
2. Poor Personal Appearance – Shoddy tools, filthy or broken equipment, and vehicles in poor repair are a sure telltale sign of not caring. Do you think that the person like that will care about your job?
3. The Lowest Bid – When you are reviewing bids, if a contractor says he will give you a special low price that you must keep secret, he/she is scamming you. There can only be two reasons for this. Either the contractor does not intend to finish the work, or he is clueless about pricing – both of these a sure sign to run away. If the contractor for your project tells you something that’s too good to be true, it probably is.
4. Payment in Cash – Unless you have a stash of cash somewhere in your pillow, do not fall for this one. I’ll do the job cheaper if you pay me in cash is a big red caution sign. If they are receiving payments in cash, do you think they have insurance? You may be tempted by a big discount offered for a cash payment or advance, but those savings and your money will be as gone as the contractor who just left to get supplies and will supposedly be back tomorrow.
5. Cheaper Materials – Be suspicious of a contractor who claims he has extra or leftover lumber or supplies and can give you a great quote on a project. You should wonder and ask where those materials came from and realized that somebody, even if it wasn’t you, paid for those supplies. Nothing ever falls from the truck.
6. I Was In The Neighbourhood – One of the most frequently used lines is that the contractor was in the neighborhood doing work and just happened to drive by and see something wrong with your home. Being the kind-hearted person that he is, he took time off from his busy schedule and wanted to stop and alert you to the problem you have. And even more convenient for you, he and his crew can work you in while they are in the area. Be wary of anyone showing up unscheduled and offering to do work right away with the pitch that they’ll cut you a deal because they are already doing a project close by.
7. Getting your driveway repaved – This is another common scam. Even if someone two houses down from you just had it done and it looks fantastic, don’t assume the guy who shows up at your door offering to do yours is the one who did the other. Most of the time it isn’t the same contractor, but another one shadowing the good one. This other guy will do a sub-par job, and you’ll be left with cracks in both your bank account and driveway.
8. Pay Upfront – Again, this is easy. If you pay upfront, you may never see this “contractor” again. No reputable contractor will ask for most — or all — of his payment immediately. In fact, most legitimate contractors only bill AFTER the material is on site and then again when the job is done to your satisfaction. If someone asks for large upfront payment — run!
9. Referral Schemes. – Some scammers will offer you a substantial “discount” if you promise to refer other customers or let them show off your home as a “model” or “demonstration” project. At best, this is a marketing gimmick. At worst, it’s an outright scam, because the “discount” is usually not a discount at all. If you’d just shopped around, you would have discovered that a reputable contractor’s “full price” was better than the scammer’s so-called discount. Those who are will hit you up for a lot of cash while providing little or poor work in return. Tells you your job will be a demonstration. Some contractors may even offer you a cash bonus to let them use your house as a model. Established contractors should have completed enough previous projects that they won’t need your job as a demonstration. If they do, this could signal the contractor is not experienced or is running a sham business. If you want the job done right, don’t hire him.
10. Do You Need A Contract? – Do you need a contract for your project? The short answer is yes. Except emergencies, when the scope of the work is clearly defined, and you’re in a hurry, insist on a contract for any work done on your home. It doesn’t have to be a lawyer-approved formal document loaded with legal jargon. Instead, it should be written agreement that outlines your expectations, how the contractor plans to fulfill them and clear guidelines for payment.
11. You get a permit If the contractor asks you to get required building permits run. Contractors should provide all necessary permits. If they don’t, they may not be licensed or registered properly under the requirements of your town or township.
12. Low bid – extra for materials – Another scam is to bid low and then start charging you extra for materials you thought were included in the price once the job begins.
13. Pay attention to how carefully the contractor looks at your job before bidding. – If a bidding contractor just eyeballs the job and says, Yeah, we did a job just like this and I’ll charge you the same, or if he doesn’t take notes and measurements and make material and labor calculations, you may be dealing with a contractor who isn’t thorough enough to do a good job.
14. Second-Rate Materials – If a contractor claims he’s already got materials he wants to pass along to you at a discount, watch out. Usually, these materials are seconds, ungraded or below-grade minimums for code, or they fell off a truck. Small contractors rarely buy in volumes that yield these significant discounts, and contractors rarely carry large inventories of material. (If they do, they severely misjudged quantities on a previous job, which doesn’t speak well of their estimating skills.)
Red Flags to Avoiding Contractor Scams Once the Job is under way
A contractor’s dirty laundry becomes more evident once the job starts. But many homeowners are reluctant to act on their concerns early, thinking I already signed the contract, and maybe it will get better. If you see some of the following signs, respond immediately, it will only get worse.
15. Unexpected Price Hikes If your contractor arrives claiming that materials cost more than he thought, and he’ll have to charge you more, stop him at the door: Unless the job is cost-plus, most contracts between you and your contractor are for firm labor and material prices. The contractor has to eat any mistakes he makes due to underbidding. The only time the price should change on a fixed bid is when you initiate and then sign off on a change order that alters the scope of the work.
16. Contract Changes If the contractor violates the terms of the payment schedule by claiming he is running short of money and has to move up a progress payment to an earlier date, insist on sticking to the original terms. In this situation, the contractor probably isn’t managing cash flow well and needs your payment to satisfy past material bills or debts to subcontractors. It’s a common error even reputable contractors make because they touch lots of money, yet relatively little of it is theirs. But this is no way to run a construction business. Pay only as you agreed in the contract.
17. Subpar Materials: If during one of your walk-through inspections you notice that a different material than is called for in the contract is being used, call the contractor right away. Scam artists will use 3/8-in. plywood where the contract calls for 5/8-in. or a 2-in. layer of gravel instead of the specified 4-in. layer. (These savings on materials lines their pockets.) If this happens once, it can be an honest mistake or a sloppy subcontractor. But check a few other material specs against the contract or plans, just to make sure.
18. Payment If subcontractors complain directly to you they haven’t been paid, or if the contractor’s material bills aren’t getting paid and you are getting calls, confront your contractor. Your final payment to the contractor should be issued only when you’re entirely satisfied with your punch-list and final walk-through. When you write that last check, even reputable contractors take it as sign that the job is finished. So, no matter what the sob story, don’t give into the pressure to write this check until you’re satisfied.