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Five Signs Your Contractor is Ripping You Off (Or About To!)

Our weekly home columnist is back with advice on how to avoid common scams among contractors

The summer months are when many people choose to begin repairs or renovations on their home. With plenty of good local contractors in the area, there's no reason to be swindled. Here are some of the common scams a bad contractor will attempt to trap you with:

They ask for a huge deposit to start the job

If a contractor tells you they need a third or half of the total amount upfront, run the other way. While it is not uncommon for a contractor to request a reasonable deposit to start the job, asking for a huge deposit is a sign that they are in debt and are about to use your money to pay a bill that has nothing to do with your job. A great contractor can order supplies and set up their workers without a deposit. All 203k FHA approved contractors get paid in phases and only when they reach a certain level of completion with the job.

The quote keeps changing 

Get all agreements in writing. Verbal agreements are almost impossible to prove in court. Watch how, "Take my word for it" turns into, "We have an unexpected issue in the project. I need another $10,000." Make sure you see their license and proof of liability insurance before hiring them. Also, check for any cases with the Better Business Bureau.

The crazy thing about this scenario is that instead of firing the person, many homeowners throw good money after bad money in the hope that this person will get their act together.

Side note: if your contractor actually says they would never cheat you, they will.

This price is for "today only"

A huge scam sweeping  many areas of the country is the "door to door" contractor that rings your bell offering a great rate for a job, but for that day only. That means today is the only day you will see them after they get your deposit. Good contractors do not go door to door.  They have so much business from referrals that they don't have time to ring your doorbell asking for work.

A twist to this scam are the contractors that show up a day after a hurricane or tornado. These scammers have been known to actually inflict the damage that they want to get paid to repair, such as damaging part of a roof and then looking for work to repair the damaged section. The Federal Trade Commission has a great webpage on this:
http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt030.shtm

They push hard to bill you for supplies

Homeowners often get quotes for supplies from their contractor. This is dangerous because contractors often mark up the supply costs to pad their margin. Even if that tile you love costs $5 per square foot at Home Depot or Lowes, you should know that the contractor is not paying retail prices for supplies. If they are pushing a particular item on you, it could be left over materials from another job. Get the supplies yourself or ask for supply receipts.

No license and/or no insurance

If they say they don't need a license for a particular job or are working under their friend's license, NEXT!

If you ask them if they have insurance and they go on and on about how there's no need for it because it's a simple job, NEXT!

Next Column: Part Two..Five Surefire Ways to Guard Against "Creepy Contractors."

Gary Smith June 08, 2011 at 11:30 AM
You may want to re-read #1 of your 5 signs about contractors: They ask for a huge deposit to start the job. In that section you say: "All 203k FHA approved contractors get paid in phases and only when they reach a certain level of completion with the job." When in fact, HUD allows the lender to offer, at the loan closing and before the work begins, 35% or more of the agreed upon rehab contract total to be advanced to the contractor and used for material purchases, etc. gns - 203K Construction Consultant

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