How to Avoid Contractor Scams

To be clear, the majority of contractors are hardworking and honest people who are great professionals to work with. However, there are some scams that are commonly reported to the Better Business Bureau.

Like they say, it’s better to be safe than sorry. Whether you need a contractor for some work you’re doing to get your home ready to sell, to fix up a foreclosure you just bought with our help, or some additions you’re adding to your new home, take a quick read through this article to make sure that you don’t fall prey to these scams.

If they need all or most of the money up front

While your immediate thought might be that of course, you would never give a large percentage of the money up front, this is actually the most common scam that’s reported to the Better Business Bureau.

The thing is, contractors don’t just perform work for you. They also have to buy all of the necessary materials, rent machines and equipment, and other exceptions that is different from just paying employees. The contractor explains this to you, and it sounds reasonable. So, people willingly give up 50% of the project up front and save the other half for a well-completed job.

However, this now gives the contractor two options to be untrustworthy. One: he can just take the money and leave. This is less common because you likely live in the same community, and in today’s world of online reviews, it’s harder to escape.

The second opportunity for a shady businessman is that he can do subpar work and go over your scheduled time because if you already have given him thousands of dollars, chances are, it’s going to take quite a lot to fire him.

If your contractor truly does good, regular work and pays his bills, he’ll either have a good business plan to pay for the necessary equipment and materials or suppliers will provide these on credit.

This means that you should never pay more than 10% of the total amount of the job or $1,000, whichever one ends up being less. In fact, this is even the legal maximum in some states. It gives contractors some upfront capital for materials (which shouldn’t be necessary) and establishes the fact that you are a series customer to a busy professional.

If you don’t add it all to the contract

After you make an initial written agreement with a contractor and he starts working, things might change a little bit. Whether you noticed that you’d actually like a slightly different upgrade here or he suggests a nice extra touch there, these last-minute details are sometimes agreed upon verbally.

After all, you’ve already completed the contract, your verbal agreement was very clear, and he seems like a great guy. Unfortunately, your contractor is under no legal necessity to complete these verbal agreements whether you paid him extra or not.

Even if he is truly a great guy who would honor these agreements, numerous other problems could take place. Say, for example, he has to take time off work for a personal emergency and his company finishes up the job. If they’re unable to reach the original contractor, there’s no way for them to know that you have paid for extra services.

This is advice true both for contractors and everything else that’s important: always get it in writing. If you’re revising a contract that was already written, add any missing items and put your initials and ask the contractor to initial each change.

This is the only way you can have legal protection if things are completed as agreed.

There were some problems they didn’t expect

I hate to add this one because after working with real estate for some many years, I know that unforeseen consequences happen extremely regularly. However, some contractors could use this fact as a way to get more money, even when it’s not fully necessary.

Your contractor might inform you that they ran into some problems that couldn’t have possibly been predicted, making the price of the job shoot way up. Like I said, he might be being fully honest because this kind of thing can, unfortunately, happen.

To find out if your contractor is being honest, you can get an outside inspector to come take a look. If you need help finding a good inspector, you can take a look at our other article on the subject.

Even if the problems are legitimate, it’s also possible that the contractor gave you a low offer that you would agree to, knowing they could greatly raise the prices later.

In order to make sure that you don’t fall prey to this scheme, make sure your contract contains a procedure in case these events do happen and you need to adjust the order, a mini contract that includes a work description and fixed price for anything that could need to get added to the job in progress.

Additionally, make sure to conclude that the extra work can only proceed after the change order is signed by both of you. This way, you’ll be protected both from unforeseen consequences and an unscrupulous contractor.

Now you know

The thing is, most contractors are excellent businessmen who want to help make your home great. Another way you can make sure that you get an honest business owner is by asking them for references and checking out their licensing info.

But, now that you’ve read this article, you know the scams those unlikely few might pull, and, if you get unlucky enough to run into one, you won’t be fooled.

If you need help finding a great contractor in the East Tennessee area, please give us a call at Priority Real Estate and we’ll help you out.

Michele Karl is the Owner/Broker of Priority Real Estate. She can be reached at her email at [email protected] or give her a call at her office at 865-577-6600.