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You are here: Information Center >> Consumer Protection >> Home Improvement Scams

Home Improvement Scams

What should I do before hiring a contractor to work on my home?

Before hiring a contractor to work on your home, you should interview each potential candidate to find out how long they have been in business, whether they are licensed and registered with your state, how many projects similar to yours the contractor has completed within the previous year (ask for a list of references and then check them out), whether your home improvement project will require permits and what types of insurance they carry. The contractor should have personal liability, worker’s compensation and property damage coverage.

Thoroughly check the contractor’s references; these past customers can help you decide if the contractor is right for you. Ask the references if you can visit their home to see the contractor’s work. Find out whether or not they were satisfied with the work and whether it was completed on time. Where there any unexpected costs? Did the contractor show up on time? Most importantly, would they use the contractor again?

Get written estimates from several different contractors. Make sure the estimates are based on identical project specifications.

CAUTION: Do not hire a contractor merely because you share an ethnic or cultural background. Coming from the same part of the world as your ancestors does not make a contractor competent or trustworthy. Many contractors use such influences to secure work and then fail to adequately deliver.

Are there any warning signs of a potential home improvement scam?

Yes. Certain things should set off alarm bells when dealing with home improvement businesses. For example:

  • door-to-door salespeople who do not have local connections and who offer to do work for substantially less than market price
  • companies that list only a telephone number or post office box as contact information (This is especially true if it is an out-of-state company.)
  • contractors who will not provide references
  • salespeople who offer to inspect your house for free (Never let anyone into your house unless they can present authentic identification that establishes their business status. Look up the employer’s phone number yourself and call to verify the salesperson’s identity.)
  • contractors demanding cash payment for a job or who ask you to make a check payable to a person other than the owner or company name
  • contractors who offer to drive you to the bank to withdraw funds to pay for the work
  • contractors who offer you discounts for finding other customers
  • contractors who ask you to get the building permits

What should be included in a home improvement contract?

Remember that contract requirements vary from state to state. Before signing any contract, check the laws of your particular state. Moreover, even if your state does not require a written contract in this instance, demand one.

The contract should be clear, concise and complete. Do not sign a contract that contains blank spaces; cross them out.

Before you sign, make sure the contract contains:

  • the name, address, phone number and license number of the contractor;
  • a detailed description of the work to be performed;
  • a detailed list of all materials including color, model, size, brand name and product;
  • a schedule and method of payment, including down payment, subsequent payments and final payment;
  • any oral promises made by the contractor;
  • the start and completion dates;
  • the contractor’s obligation to obtain all necessary permits;
  • a list of warranties covering materials and workmanship with the names and addresses of the parties honoring the warranties and the length of the warranty periods;
  • a provision stating the grounds for termination of the contract by either party—remember, you have 3 business days to cancel the contract if you signed it in your home or at a location other than the seller’s permanent place of business; and
  • total cost of work to be performed.

My contractor never finished the job. What do I do now?

You must pay the contractor for the work he or she completed. However, do not make the final payment until you are satisfied with the work and all subcontractors have been paid. Or, you can cancel the contract and may be entitled to a refund of any down payment or other payments made towards the work, once you have sent the contractor a written demand by certified mail.