Hiring the right contractor is the first step of any successful remodeling project, big or small. Scammers know this fact and try to exploit unsuspecting homeowners with various deceptive tactics. Here are eight common types of remodeling scams you should be aware of — plus some effective ways to avoid each one.
1. Door-to-Door Scams
Remodeling scammers usually take the old-fashioned approach as door-to-door salespeople to target homeowners at the most opportune time. They will knock on your door after a severe storm or natural disaster and claim your home has severe damage — a popular strategy known as “storm chasing.”
They might also make exaggerated claims about their services or offer “limited time deals” that seem too good to be true. The work usually revolves around exterior renovations so they don’t have to enter the house, such as roof repairs or driveway resurfacing. Homeowners who don’t know any better might easily succumb to these high-pressure sales tactics.
Reputable companies rarely attempt door-to-door sales, so you should be skeptical of anyone who takes this approach. If you find yourself in this situation, ask for the salesperson’s credentials and research the company further before committing to any project.
2. Unlicensed Contractors
Contractors might try to complete renovations without the proper licensing or permits. This scam usually happens with small-scale interior renovations that authorities might not notice. However, if a building inspector or your homeowners association (HOA) catches wind, you could face significant repair fees and fines and the contractor might go to prison.
Another unlicensed contractor scam occurs when they ask customers to get a homeowner’s permit that allows them to complete DIY renovations. In other words, the contractor wants you to lie about the project so they can work without a license. They might offer you lower prices or additional miscellaneous repairs as a form of bribery.
The key to avoiding this remodeling scam is straightforward — only work with licensed contractors, check for references, and always demand them to show or acquire permits before touching your house. Stay on the offensive during negotiations and don’t let them push you around.
3. Online Phishing
Phishing is the most common online scam by a mile. Millions of phishing emails are sent every day, and in 2022, there were 300,497 phishing victims in the United States alone. Contractors will use this scamming technique by creating fake websites, hosting fraudulent online auctions and offering people cheap remodeling projects.
You should always verify the security of a contractor’s website before providing payment details or personal information. An easy verification step is to check if the website’s URL begins with “https” and has a lock icon. You must also avoid suspicious emails and don’t click on links from unknown senders. If the email looks like a scam, it probably is. Trust your intuition.
4. Insurance and Loan Fraud
Scammers often exploit homeowners’ insurance policies or offer fraudulent loans for big remodeling projects. They might make a false claim during the project, deliberately increase the repair costs or hire underqualified contractors to do shoddy work. In all these cases, the homeowner pays hundreds or thousands of dollars extra.
These types of scams are difficult to spot on the surface. You must thoroughly review project documents before signing them and contact the company’s insurance provider to verify its legitimacy. When in doubt, you can also ask your lawyer to review the project documents and look into the business’s history.
5. Large Upfront Payments
Some scammers don’t put in the effort for long-term schemes such as insurance fraud or online fishing. These impatient fraudsters will take a more direct approach, demanding large upfront payments and bailing with the money afterward. This simple scam is the most common incident reported to the Better Business Bureau.
Trustworthy contractors usually ask for no more than 20% of the estimated project total as a down payment. You should be skeptical if anyone demands a higher percentage — especially in untraceable cash. Look further into the company’s history before making verbal or written agreements.
6. Vague Contract Agreements
Scammers will also entrap unsuspecting homeowners with vague contracts. They won’t include the project’s materials, tools or overall costs so they can change the details later and turn a bigger profit. Conversely, they will refuse to make certain repairs and effectively blackmail you until you agree to pay extra.
This scam is difficult to recover from because you willingly agreed to the contract. That’s why you must be cautious when reading the project’s details. Be sure to set a firm timeline and confirm everything you agreed on is in the fine print. A legitimate contractor will be fully transparent during negotiations and will never try to hide expenses from you.
7. Unforeseen Problems
This type of remodeling scam happens toward the end of the project. The contractor will tell you they encountered unforeseen problems and demand a price increase. They usually blame the issues on something wrong with the house’s infrastructure, such as a missing part or damage from pests.
The contractor might have purposely hid these details from you during the initial consultation. If unsure about their honesty, you can bring in a neutral home inspector from your HOA or the National Association of Homebuilders. You must also ensure the initial contract includes a procedure for change orders and fixed prices for additional services.
8. Leftover Materials
This final scam is perhaps the laziest of them all. Before starting the project, contractors try to sell leftover materials to homeowners to increase their profits. Driveway paving companies are the most likely culprits because they often have lots of extra asphalt and concrete. They lure you in with a great deal and then drop a load of materials on your property.
You will spend lots of money trying to return the materials to the supplier or find another company willing to buy them. As a general rule, don’t hire contractors on the spot, and always research their previous projects so you know they have good intentions.
Identify and Avoid Remodeling Scams
These eight remodeling scams are the most common issues people face when encountering untrustworthy contractors. Now you know how to identify and avoid all of them. Put this knowledge to good use and take care when hiring contractors.