How to Avoid Home Improvement Fraud

Why hire a contractor or a restorer? It can be costly, but professionals may be the best way to remove water and mold and get the job done right. Plus, professional restorers can provide helpful hints to prevent further damage. Here are questions to ask before you hire and tips to avoid home improvement fraud.

Choosing a Contractor or Restorer

  1. Be sure to ask family, friends, neighbors and others about contractors they have used in the past. Ask about problems encountered before, during and after the project was completed and ask about how the contractor handled the situation.
  2. Check with the Better Business Bureau and local trade unions and associations about the reputation of the contractors in your area.

  3. Consider your budget, timeline and insurance options before meeting with the contractor.
  4. Look at the following list of questions. Pick a few important questions and call and ask each contractor. This will save you time and help you narrow down your list. Make an appointment to meet with your top choices.

Contacting a Contractor or Restorer

Questions to ask

  1. Are you a residential contractor?
  2. Do you provide the services for the work I need done?
  3. How many years of experience do you have?
  4. Will you be billing my insurance company or me?
  5. How long will it take you to provide me with an estimate for the cost to repair or renew personal property? What is the expected fee for the estimate?
    • Most remodelers will charge for the time they spend preparing a detailed written estimate.
    • The cost of the estimate will vary depending on the scope and complexity of the project.
    • Consider getting at least two or three estimates, in order to compare contractors and projects.

  6. What kind of materials will you be using for the project?
  7. Can I see a breakdown list of costs (i.e. labor, insurance, materials, overhead)?
  8. Will the estimate detail the plans and specifications?
    • This will allow you to compare several estimates based on identical project specifications.

  9. Can you arrange for the packing, transportation and/or storage of household items?
  10. Can you provide me with references?
  11. WHN STAFF TIP: But Are They Good?

    Be sure to follow up and contact the references. Ask about the job quality and trustworthiness of the contractor. Ask about problems that were encountered and how they were resolved.

  12. Do you have special training in
    • Mold remediation?
    • Water removal?
  13. Do you have experience with flooding, natural disasters or fires (if applicable)?
  14. Do you have experience dealing with insurance adjusters and companies?
  15. How long before you will be able to begin work?
  16. How quickly can you have a crew onsite to board up the site and, if needed, set up temporary heat, plumbing and electricity?
  17. Is your company bonded?
  18. Is your company state licensed?
  19. WHN EXERT TIP: 14 States Don't

    Fourteen states do not require licensing for home improvement contractors; 36 states require home improvement contractors to be licensed. Check with your state licensing agency, local building inspectors or consumer protection officials to find out about licensing requirements in your area.

  20. Do you carry the following types of insurance?
    • Personal liability?
    • Worker's compensation?
    • Property damage?

    WHN READER TIP: No Insurance Policies?

    Avoid doing business with contractors who don't carry these insurance policies. Otherwise, you'll be held liable for any injuries and damages that occur during the project. Ask to see proof of insurance.

  21. Can you provide a Certificate of Liability Insurance verifying that you carry liability insurance?
  22. Will you arrange for any subcontractors for cleaning or repairing, and guarantee in writing that they are licensed, insured and experienced?
  23. Will you apply for the appropriate permits from the local building department?
  24. Is your work guaranteed or does it have a warranty? For how long? (Most will guarantee their work for at least a year.)
  25. What is the method and schedule of payment?
    • Typically you pay a deposit when you sign the contract, at regularly and pre-designated intervals, when you sign a change order and order a custom-made item.

  26. When will you expect the final payment?
    • Usually, the final payment isn't made or the affidavit of final release isn't signed until you are satisfied with the work and have proof that subcontractors and suppliers have been paid.
    • Otherwise, lien laws may allow unpaid subcontractors and suppliers to "attach" your home through a "mechanic's lien".
    • Always ask the contractor, and every subcontractor and supplier, for a lien release or lien waiver.

    WHN READER TIP: In Writing

    Get all agreements in writing. Make sure they state that projects will meet code standards.

Contract Components

WHN READER TIP: John Hancock

Designate one family member to sign contracts and make any decisions when dealing with contractors.

  1. Contractor's name
  2. Company address and phone
  3. License number, if required
  4. The payment schedule for the contractor, subcontractor and suppliers
  5. The estimated start and completion dates
  6. The cancellation policy
  7. The policy and procedure regarding change orders (a written agreement to change the work described in the original contract. Remodelers often require payment for change orders before the work begins.)
  8. A detailed list of what work will and will not be performed
  9. Any verbal agreements. In most circumstances, oral contracts are as enforceable as written agreements. Oral contracts related to real property are an exception to this rule. Still, try to get everything in writing.

Signs of Home Improvement Fraud

While home improvement fraud can encompass any area, fraudulent contractors usually target homeowners who need roofing, furnace or driveway repairs. Beware if you hear any of the following:

  1. An offer of something for nothing, or free merchandise.
  2. Pressure to act now.
  3. An offer of a kickback (a lower price or reduced fee) for referring potential clients.
  4. A seller who criticizes his/her own merchandise or another seller's merchandise.
  5. A contract with vague or tricky wording.
  6. The seller's spoken promises are different from the contract.
  7. Exaggerated claims or lavish promises.
  8. Demand for full payment before work is completed.
  9. Unwillingness to provide written estimate and contract, or failure to include the costs of products and labor, the quality of materials used and the start-up and completion dates

How to Avoid Fraud

  1. Get recommendations from friends, neighbors, and coworkers who have had remodeling work done, and check out the contractor with the Better Business Bureau and state and local consumer protection officials.
  2. Get at least three estimates and when comparing estimates, make sure each one is based on the same set of plans and specifications and the same scope of work, with deviations presented as options.
  3. Keep a paper trail of all communications with the contractor.
    • Write a letter or an e-mail that includes the items discussed, what the contractor said, what you said, the agreed terms and next steps of the project.
    • Keep a copy for yourself and send the letter to the contractor/insurance agent/adjuster.
    • Ask the contractor/agent/adjuster to write a written response to your letter and confirm or disagree with what you have written. That way, you’ll have a paper/e-mail trail of the project. Remember, save all documents and emails.
  4. If you get a loan for your home improvement project, you should have the lender make the check out to you, not the contractor.
    • If you use your home as security for a home improvement loan, and you don't repay the loan as agreed, the lender can take your home and sell it, using the proceeds to pay off the loan and any foreclosure costs.
  5. Always get a written contract and take time to make a decision.
  6. Make final payment only when the work is completed to your satisfaction.
  7. If you suspect a repair rip-off, call the consumer division of your state Attorney General or the Federal Trade Commission. If you suspect fraud, waste, or abuse involving Federal Emergency Management Agency disaster assistance programs, report it to FEMA's Inspector General's Office.
  8. Additional Information

    1. Association of Specialists in Cleaning and Restoring

    2. Institute of Inspection, Cleaning and Restoration Certification

    3. Better Business Bureau