WHAT IS Contractor Fraud

Contractor fraud is when illegal business practices are committed by firms hired to reform, renovate, repair or build residential properties. Contractor fraud is typically carried out by small firms promising quick repairs or upgrades for below market prices. The work is usually substandard, unnecessary or may even cause damage to previously undamaged parts of a home. The victim of contractor fraud is often pressured into paying for the work through threats and intimidation.

BREAKING DOWN Contractor Fraud

Contractor fraud often ends up costing the victim twice because they get taken in by the fraud and then have to pay a legitimate firm to bring the work up to standard or repair the damage. Organizations like the Better Business Bureau have made it harder for these fraudsters to prey on informed consumers, but some fraudulent contractors continue to target vulnerable groups such as the elderly by going door to door.

How to Avoid Contractor Fraud

Renovating, remodeling and maintaining a home can be complicated. Hiring qualified professionals who can do the work for a fair price and in a timely manner can make it a much easier process. Unfortunately, there are fraudulent contractors who will do a poor job, or never even show up.

However, taking the following steps can minimize the risk of hiring a contractor that does not have a homeowner’s best interests in mind.

First, for major renovations and remodels, it might be wise to hire an architect to help with the plans. Architects can draw up building plans, write contracts and get permits. They have also worked with contractors in the past, so they know what to look for when it comes to experience, and likely know the signs of a fraudulent contractor. Checking the contractor’s license number before starting is an easy way to verify that the contractor is in good standing with the state contractor board. If they do not produce their number, or it cannot be verified, there is a good chance they are not certified. Having some kind of insurance certificate or worker’s compensation attached to major jobs is always a good idea. The certificate must cover the project range, or the homeowner could be liable for damages to the team. Getting three or four bids is a good way to cross-reference contractors. Any low-ball bids are a red flag suggesting a higher chance that the contractor will perform poor work or charge additional, unnecessary fees. Verifying exactly what is included in the bid is a must.