9 Home Renovation Scams To Be Aware Of
FOREWARNED IS FOREARMED
The warm summer is a perfect time to start work on a home renovation project, and contractors find themselves busiest at this time of the year. Unfortunately, legitimate home renovation experts aren’t the only people who are putting in extra hours. Con artists, grifters and dishonest companies hide among the professionals, looking to take advantage of homeowners. The real risk of losing time and money to these cons makes it worthwhile to know the tricks and traps they use, and learn ways of protecting yourself.
DOOR TO DOOR RECEPTIONS
Many common renovation scams start with an unexpected knock on the door. A contractor arrives, truck in the driveway and states they were “just in the neighborhood”, before beginning a pitch for some home improvement work. The only thing they intend on improving, however, is their bank balance.
This common renovation scam involves the supposed contractor graciously offering you a “free inspection” that discovers a laundry list of potentially dangerous problems with your roof, chimney or foundation, offering you a “special deal” to fix the issues.
Once you agree, they will usually demand an exorbitant down payment on services, and either disappear entirely with your money, or perform the work as inefficiently as possible, collecting massive fees in the process. Even if the work is completed, they may find more “problems” and insist on working further on the building to drive up more costs.
A “SPECIAL” DEAL FOR TODAY ONLY
The contractor offers you a “sweetheart” deal on your project that they can only offer today, take it or leave it. Using some high pressure sales tactics and preying on people’s natural fear of missing out, many homeowners sign up immediately, only to find out that the price wasn’t actually as low as they’d been told.
The truth is, that the deal wasn’t “special” at all, and was charged at an inflated rate or involved a number of hidden fees, but it was too late to back out once the contract had been signed, leaving the homeowner with a huge bill to pay.
If a contractor offers you a discount, request proof that they’re charging less than their usual rate. Also try to get estimates from more than one renovation company. Always avoid salespeople who try to strong-arm you into signing a contract without giving you enough time to think about it.
This con involves crooks posing as contractors trying to get access to your home. This may involve a cold call asking for a “meeting”, or going door to door offering services. Robbing, not renovating is their real goal in this scenario.
Once you let them into your home, they will look for possible entry points and valuables to stage a later heist. Some brazen criminals will even make a show of starting the work, waiting to be left alone in the house.
Always research potential contractors before letting them into your home. Verify their name, business license, address and telephone number. Before beginning work, insist on seeing their insurance papers. Any legitimate contractor should have no problem with providing this information.
This is another common “door to door” con. The scammer claims they have some leftover materials from a nearby job that they could use to make some quick repairs around your property at a discounted rate. These are usually small jobs, like replacing weather stripping on windows, or sealing driveways. They push for a quick sale at a low price, take your payment and get to work.
The truth is that there was no “nearby job”, the materials aren’t “leftover” and you are paying for defective, low quality or even completely fake materials. At best, the “repairs” wear out and need to be fixed again within months, at worst, they may cause damage to your home.
Legitimate contractors would have no need to try to sell small repairs door-to-door and purchase only the amount of materials needed for a project. In the unlikely event that the materials are actually “left over” from a previous job, the contractor would still be running a con, having managed to sell the same materials twice.
Some renovation scams involve gaining the trust of a prospective client, and engaging in dishonest business practices to overcharge, cut costs or expose clients to serious financial risks for their own benefit.
CASH AND DASH
It’s not unusual for contractors to ask for a deposit up-front before beginning a project, but this renovation scam involves taking a large deposit with no intention of completing the work, disappearing the moment the cheque is cashed. Deposit requests of greater than 30% (although 10-15% is ideal) are a warning sign that you may be getting conned.
Even contractors with full intention to complete the work who request large deposits are to be avoided. Large deposits can be an indication of contractors in poor financial standing who may not be able to afford to pay for materials and labor, creating a risk that they may be forced to abandon the job due to mismanagement or bankruptcy.
Beware of contractors who ask for large deposits, especially those that ask for them before providing proper documentation on the project (estimates, quotes, pre-contract agreements) or providing a detailed contract.
A large renovation or building project is expensive, and that often requires getting financing. Some contractors may “know someone” and get you in contact with a lender, with a “special” low interest rate that offers a far better deal than what you could get from the bank. Many people have signed these documents without a careful review and paid seriously for the mistake.
A closer examination of the paperwork reveals the fine print: that “special” low interest rate only applied for a small period of time, or includes fees that removes any possible savings. You may find that you’ve accidentally signed a high interest home equity loan, or in extreme cases, even signed over the deed to your house! The contractor, of course, was likely given a kickback for roping you into this loan, and is far more interested in tricking clients into signing bad loans than completing projects.
Always get multiple offers before agreeing to financing, and never sign on to a loan without consulting an attorney first.
UNDER THE TABLE
This common issue may not be an outright fraud, but it is a warning sign that anyone looking to hire a renovation company needs to look out for. An unlicensed contractor may offer to do the work at a low rate, but assure you that getting the work done without a permit is cheaper and more efficient than going through the proper channels.
What you aren’t being told is that the contractor is often deeply unqualified and not skilled or experienced enough to perform the work properly. The work will frequently be substandard and not meet building codes.
Because of the lack of building permits, it is far more difficult to hold the renovator accountable if something goes wrong with the work, leaving you with the expense of cleaning up after their mess. Worse, substandard electrical and structural work can be outright dangerous to you and your family. While building codes and permits may be confusing and frustrating, a large number of requirements are in place for health and safety reasons.
You are also open to risk if an employee is hurt on the job. Under-the-table contractors do not have worker’s compensation coverage, making you liable for any injuries that happen on your property.
Always work with a building permit, and make sure that your contractor is licensed and offers a warranty. A small amount of inconvenience getting the right permits and paying a reasonable rate for high quality work can save you thousands of dollars or more in the future.
MAINTENANCE AND SERVICE SCAMS
Some scams involve licensed businesses engaging in deceptive (but not quite illegal) practices. Usually by posting ads in local papers, or pasting flyers up around town, these companies take advantage of frugal homeowners looking to save money on maintenance services.
This dishonest tactic is common in roofing, heating and mold abatement. A company will advertise low priced inspection or cleaning services as a way of getting their foot in the door. Once they finish their work, they will inform you of a list of problems with your home, trying to scare you with warnings that your home is dangerous to live in, or on the brink of needing expensive repairs unless the problem is dealt with immediately.
What follows is an expensive ordeal of often unnecessary work. What could have been fixed with a patch or spare parts is now a complete replacement of an entire system. These unscrupulous companies take advantage of people’s lack of knowledge and exploit their fears.
If you ever purchase services and are told that you need to buy more, get a second opinion. Also be sure to research companies with professional associations, online reviews and the Better Business Bureau before making a purchase.
LOW PRICE, LOW QUALITY
Some companies may advertise prices that seem too good to be true, and they often are. This is frequent in the cleaning and maintenance fields. While the companies do indeed show up and work, they manage to cut every corner and do a terrible job that’s functionally the same as doing nothing.
Customer reviews are helpful when looking into home service companies, try not be blinded by a low price. Not spending the money at all is more cost effective if the work isn’t useful.
WAYS TO PROTECT YOURSELF
Being aware of common home services scams is one way of protecting your home and finances, adhering to some best practices can help too:
Always research a contractor before starting work. Look for companies with a strong social media and web presence, positive online reviews and membership in professional associations. Companies who take their reputation seriously have a vested interest in fair dealing and quality work.
Make sure you get references from previous clients and license numbers. Require proof of insurance, warranty, and worker’s compensation coverage.
Get more than one estimate on a project, look for second opinions if a contractor “finds” something. Even with urgent repairs, you will have enough time to verify that you need them. Don’t let scare tactics convince you to pay for something before you make sure you really need it. .
Always take some time to make decisions and investigate. If someone is insisting you agree to something right now, they’re likely hiding something or trying to prevent you from comparing them to competitors.
Don’t ever start a job without getting a detailed contract in writing. A contract should stipulate exactly what is expected out of the contractor, how deficient work is handled, communication guidelines, payment dates and milestones, and responsibility for repairs once the work is done.
Don’t work with “Door to Door” contractors. Legitimate professionals find clients through referrals, marketing and reputation.
Never start work without a permit. The consequences can be expensive.
Never sign private financing documents without careful review of the terms by an attorney
Beware of rushing into hiring someone based on price alone. If a deal looks too good to be true, it probably is. Unscrupulous companies may try to offer you shockingly low rates to get you to contact them, then attempt to sell you more expensive services that may be completely unnecessary.
Requiring reasonable deposits is a common practice. 10-20% is often a fair amount to ask for up front once contracts have been made official. Deposits of 30% or more are a warning sign that you may be getting conned or dealing with a contractor out of their depth. Always make sure that a detailed contract is signed before letting any money change hands.
Seniors should be especially aware. Fraudsters frequently target older adults, especially those living alone. Before agreeing to anything or making an initial payment, make sure to talk to family, friends or professional contacts. Having more than one set of eyes on a potential deal can spot trouble before it starts
If you or someone you know has been defrauded or had someone attempt to defraud them, contact the Canadian Anti-Fraud Centre at 1-888-495-8501