Perform Due Diligence before signing a contract. Research the contractor thoroughly.
Some common scams by independent contractors include:
I need the Money Upfront, Before I Start the Job
- Never prepay more than $1,000 or 10% of the total contract amount
- Pay for the work as certain stages are complete. Include this in the contract
Take My Word for It
- All terms agreed to by the parties should be in writing and be part of the final contract
- Although promised verbally, any agreed to extras/upgrades outside of the initial contract may not be performed.
- If not in the written contract, there won’t be any legal recourse
- Get everything in writing
I Don’t Need to Pull a Permit
- It’s their legal duty to pull all building permits
- As the homeowner, it’s important that YOU don’t pull the permits. They may tell you that it’s cheaper/quicker. If you do pull the permits, than YOU will be required to close the permit and monitor all the inspections. Even though a contractor did the work
- The contractor may state that he’s encountered some unforseen obstacles. This may require more work and additional cost
- Lowest Bid? Don’t simply accept the lowest big without due diligence – it may be a lowball offer to get the job and the price will be increased later
- Ensure that any contracts include procedures for change orders. Include some fixed prices as well.
I have Extra Material I Can Sell you Cheap
- These materials will not have a manufacturer warranty
- Any leftover products may not match your job properly
- They may be selling you leftover materials from a previous job and cheating a previous customer
I Only Take Cash
- Never pay in cash, even if you are given a discount
- Be aware of contractors who won’t take checks or want a check payable to them personally
- Never sign your insurance check over to a contractor
Avoid Door to Door Salesman and Out-of-State Contractors
- Usually not licensed or insured
- Good contractors are usually too busy to sell door to door
I Can Provide Financing
- Contractors may get kickbacks and you may be overcharged
- If financing is needed, apply with multiple lenders and don’t just accept the contractor’s recommendation
- This financing usually includes high interest rates and pre-payment penalties
I Need to be Paid Today
- Don’t make the final (or full) payment until all the work is complete and the project has passed all inspections
- Obtain a list of all the subcontractors that worked on the project before you make the final payment
- Obtain a Lien Waiver. This is a signed, written statement from the contractor that states that all the subcontractors have been paid in full. Confirm this with the subcontractors.
- If the subcontractors haven’t been paid in full, they can record a Mechanics Lien against your home.