What Is Contractor Fraud?

Contractor fraud refers to illegal business practices committed by individual contractors or contracting firms hired to renovate, repair, or (re)build residential properties. Contractor fraud in the residential sector may also be referred to as "home improvement scams."

Contractor fraud encompasses a range of issues, from shoddy work and using substandard materials to escalating project costs and over-billing.꧅ Contractor fraud often ends up costing the victim twice because apart from losing a significaꦡnt amount to the fraudster—whose inferior work may cause damage to previously undamaged parts of a home—a legitimate firm may also have to be paid to bring the work up to standard or repair the damage. A victim of contractor fraud is often pressured into paying for the work through threats and intimidation.

Understanding Contractor Fraud

Contractor fraud can take several forms. Below, we've provided information about some of the most common techniques employed. If you encounter any of these practices, take the time to investigate your contractor thoroughly.

Organizations like the 澳洲幸运5官方开奖结果体彩网:Better Business Bureau have made it harder for these fraudsters to prey on informed consumers, but some frau♓dulent contractors continu✱e to target vulnerable groups, such as the elderly, by going door to door.

Substantial Upfront Cash Advance

This is one of t🌼he most prevalent contractor frauds. The contractor demands a significant upfront advance to order materials and equipment and then either disappears with the full amount, delays the project 🍌by lengthy periods, or does slipshod work that is not worth the thousands of dollars that the homeowner may have already forked over.

Lജeaving Out Key Project Details and Low-ball Offers

Contractors can also defraud homeowners by deliberately leaving out key details of the project's scope so that the homeowner is actually getting much less than what they are paying for. Completing the rest of the project can end up with the total cost going well beyond the homeowner's initial budget. This category also includes low-ball offers wherein the contractor intentionally quotes a price that is well below the going rate for similar work and then tacks on additional prices that may result in the final cost being much greater than the initial estimate.

Running into Unexpected Problems That Req𒁃uire Additio🔯nal Cash

Another common ruse, this involves the contractor purportedly running into unforeseen, major problems—such as hidden water or termite damage—once the job is already underway. The contractor then demands a large payment to "fix" the problem, leaving the hapless homeowner with little choice but to pay up in order the keep the project on track.

Not Obtaining the Required Permits

Any significant construction or renovation project requires a building permit to ensure that the work meets safety codes. Unscrupulous contractors may get past this requirement, so that they don't have to answer to building inspectors, by either not obtaining the requisite permits or persuading the homeowner to apply for the permit in their name.

Selling Materials "Leftover" from Previous Jobs

This is a ruse perpetrated by a contractor who promises the homeowner a great 💃deal for an ad hoc project such as paving a drivewℱay or painting a house exterior because of materials leftover from a previous job.

Signs of Contractor Fraud

How can you identify a potentially fraudulent contractor? The 澳洲幸运5官方开奖结果体彩网:Federal Trade Commission (FTC) highlights the following warning signs of a home improvement scam or contractor fr𓂃aud:

• Knocks on your door for business because they are in the neighborhood
• Happens to have materials left over from a previous job
• Pressures you for an immediate decision
• Only accepts cash and asks you to pay everything upfront
• Suggests you borrow money from a lender the contractor knows
• Asks you to get the required building permits

How to Avoid Contractor Fraud

Renovating, remodeling, and maintaining a home can be complicated. Hiring qualified professionals who can do the work for a 澳洲幸运5官方开奖结果体彩网:fair price and in a timely manner can make it a much easier process. While there are fraudulent contractors who will do𒁏 a poor job, or never even show up, taking a few precautions and conducting basic due diligence can minimize the risk of contractor fraud. The Better Business Bureau (BBB) suggests the following tips to consider when hiring anybody to work in your home:

1. Research and gather information: You can search for a contractor's business profile on the Better Business Bureau website to get free information on the contractor's history of complaints and customer reviews and check if the contractor is a BBB Accredited Business.
2. Ask for references: Ask the contractor for a list of local references that you can contact.
3. Ask for multiple quotes: Shop around and get at least three quotes from different contractors based on the same set of criteria.
4. Get it in writing: Always get estimates in writing and ensure that work never begins without a comprehensive written and signed contract. The contract should include contact information, start and completion dates, a detailed and accurate description of the work to be done, material costs, payment arrangements, warranty information, and all verbal promises by the contractor.
5. Verify licenses and insurance: Verify that the contractor has the necessary licenses and insurance to work in your area, and check with the contractor's insurance carrier to confirm coverage for worker's compensation, property damage, and personal liability in the event of an accident.
6. Confirm building permits: The contractor must obtain the correct permits—generally at your cost—before commencing the project. Include a clause that final inspections should be completed by local building authorities before you make the final payment.
7. Find out about a lien waiver: In the United States, this is a statement from your contractor that says all suppliers and subcontractors have been paid for their work.
8. Think about future service issues: Ensure you are aware of your warranty coverage and how to deal with service issues in the future.
9. Arrange a payment schedule: Never make full payment upfront, but stagger the payments so that the final installment is not due until the work is complete and has been fully inspected.
10. Get a receipt: Obtain a receipt from the contractor marked "Paid in Full" once the job is completed and you have made the final payment.
    
11. Keep your contract. Put the contract in a safe place, just in case there are any questions after the work is finished.