Home Improvement Scams

Warning Signs

• Be wary of contractors who:
  • say they stopped by because they just happened to be in the neighborhood. The good ones are usually too busy to roam around in search of work. 
  • say they can offer a lower price by using surplus material. That could mean they overbilled a previous customer or didn’t finish the work.
  • make limited-time offers, pressuring you to hire them right away to get a discount.
  • demand upfront payment, or offer to arrange financing through a lender they know.

How to protect yourself from this scam

• Do insist on seeing references. The Federal Trade Commission (FTC) recommends asking past customers detailed questions, including whether the project was completed on time and if there were unexpected costs. The FTC also suggests asking the contractor if you can visit a job currently in progress. 
• Do require a bid in writing, and compare bids from multiple contractors before agreeing to any work.
• Do check the Better Business Bureau (BBB) website to see contractors’ ratings and whether any complaints have been filed against them.
• Do get a written contract before you pay any money and before the work starts.
• Do read the fine print. The BBB says a contract should include a detailed description of the work, material costs, start and completion dates, and warranty information. 
• Do verify before making the final payment that the work has been done to your satisfaction, subcontractors or suppliers have been paid, and the job site has been cleaned up.
• Do file a complaint with the BBB if you've been scammed or poorly served by a contractor.

• Don’t pay cash. The FTC recommends using a check or credit card, or arranging financing.
• Don’t put down a big deposit. The initial payment should be no more than a third of the total estimate, payable on the day the materials arrive.
• Don’t automatically take the lowest bid. Some contractors cut corners to come in lower than competitors, according to the BBB. The FTC recommends that if one contractor’s estimate is significantly less than those of competitors, ask why. 
• Don’t let the contractor arrange financing for you. Scammers may try to talk you into taking out a home-equity loan or reverse mortgage to pay for repairs and arrange for the lender to pay them directly, giving them little incentive to finish the job or do it properly.
• Don't agree to get any required building permits yourself. That should be the contractor's responsibility.

More Resources

• Contact your state consumer-protection agency to report home improvement fraud.
• Check with your state's licensing agency to see if a contractor you are considering hiring is licensed.
• The National Association of the Remodeling Industry has an online directory of its members, who have pledged to follow the organization’s ethical guidelines.
• The Eldercare Locator and the National Association of Area Agencies on Aging produced a detailed brochure on home improvement scams with tips geared for older adults.