High end homeowners are strong targets for contractor fraud. Their most frequent question is “who do I call?” Most homeowners spend hours trying to find a contractor to do work for them. They ask neighbors and friends for referrals, and take it on faith that these contractors are reputable, licensed, and insured. Here is the moment when people can become victims of contractor fraud.
Here are 10 ways you can protect yourself:
- Only use contractors who are licensed. Ask to see their documentation, and check with the state to confirm their status. Go to www.dpor.virginia.gov or call 804-367-8511.
- Check to make sure the contractor is insured. They should have general liability, workers comp, and property damage coverage. Make sure the certificate is current.
- Do not utilize contractors who approach you. They may offer special deals, or have leftover materials to do the project at a discounted price. It’s a good guess to say that we have all been approached by people to take down a tree or seal an asphalt driveway. The liability is yours if you let an unlicensed, uninsured contractor on your property, and something bad happens.
- Estimates for the work should always be submitted in writing. Make sure that the scope of the project is laid out in detail covering what is to be done, what materials are going to be used, etc. Do not accept a verbal bid from a contractor.
- Any contract should be reviewed carefully before signing. Confirm the details of the project are in order, along with the payment schedule, estimated completion date, etc. Make sure the warranty for the work is also listed, and that the contract includes clean up. Do not let yourself be pressured into signing a contract. If they are in a hurry to get the deal done, watch out! By law, you have three business days to cancel any contract after it is signed (“Cooling Off Rule”).
- Communicate any questions or concerns to the contractor verbally and in writing. Any changes to the scope of the project also should be put in writing, and added to the contract. This protects the homeowner and the contractor from misunderstandings. There may be a fee attached to some changes depending on the size of the change, or what stage of the project you are in.
- Avoid paying a lot of money up front. Some contractors may require a deposit. The federal government typically recommends that you shouldn’t pay more than 30% of the proposed price of the job in advance. Typically, this can be negotiated. Make sure the payments follow the construction schedule, and that your payments do not get ahead of the progress of the project. Tie payments to the completion of certain tasks, and not to a specific time frame.
- For larger projects, it’s better to use a credit card instead of cash. The credit card company will back the purchase and can help in the event of a dispute. If you are using a construction loan, or insurance company money, make sure that those funds are disbursed to you, and not the contractor. Also, do not let the contractor negotiate with the insurance company on your behalf.
- 9. For large projects, you may want to bring in an independent inspector to make sure the work was done to code, as well as to your satisfaction. A roof replacement may look nice from the ground, but may let in a slow leak that may not be caught until after the warranty is up.
- Use a trusted organization for contractor referrals. The Better Business Bureau (804-648-0016) and Home Connection Partners (804-855-1415) are strong advocates for homeowners, and help protect you and your largest investment, your home.
If you have been a victim of contractor fraud and think it’s money down the drain, don’t lose hope. The Department of Professional and Occupational Regulation has a fund to compensate victims of contractor fraud. To be eligible for these funds, you must have a legal judgment against the contractor, and apply to receive reimbursement of your loss, up to $20,000.
There comes a time when everyone needs a contractor. These ten ways and a little effort can help protect you and ensure a positive experience.
