Are You Smarter than a Dishonest Contractor?
Common and Not So Common Scams
Day in and day out, we are contacted by consumers who have been scammed. This section identifies the victim, the scam, and tips to help you avoid becoming the next victim. Keep in mind, these recommendations are not legal advice, but only information, to help protect you and your most valuable asset—your home. The information presented here is not 100 percent characteristic of every scam being committed, but it alerts you to a number of risks and rip-off tactics most often used by bad actors operating under the guise of trustworthy home repair contractors. Often the most common scams have variations so beware.
Victims, Scams and reKNOvate Tips
Here are some victims and scams we want to make you aware of and some tips to protect yourself.
The Victim: A homeowner who thinks they are smarter than a dishonest contractor.
The Scam: An attorney hired a contractor to install a pool. Feeling savvy enough to deal with the pool contractor, she told him he was not getting any money up front. This did not appear to be a problem. He began work on the project, dug an enormous hole in the woman’s backyard, after which he requested $21,000 to purchase all the materials and supplies to complete the installation. Seeing that he took the time to dig the hole, the attorney gave the money to the contractor. She never saw him again!
reKNOvate TIP: Rip-offs and scams happen to people from all walks of life. Dishonest contractors know how to take advantage of people who think they are too smart, too savvy, or too educated to be victimized. We have met fraud victims who are doctors, lawyers, celebrities, wealth managers — even mayors, police chiefs and detectives — who have been scammed by shady contractors. Absolutely no homeowner is immune! Some may not be “as” vulnerable, but certainly all are potential victims.
The Victim: A homeowner who believes a contractor when he says he is “licensed and insured” or “licensed and bonded.”
The Scam: A first-time homebuyer hires a contractor because he told her he was “licensed and insured” so she took that to mean he held the required contractor’s license (in this case, a plumber’s license). After he performed shoddy construction in her bathroom, she discovered that he only had a business license.
reKNOvate TIP: A business license and a contractor’s license are two totally separate things. Many states require contractors to have a contractor’s license, although some states do not require one for every construction related task. If one is required, make sure you get a copy of it and verify it with your state licensing agency. Often this can be done online.
Many residential contractors are not bonded or insured as often claimed. As a homeowner, do NOT take a contractor’s word when he tells you he is licensed, bonded and/or insured. Verify the information with the appropriate company or agency.
The Victim: A homeowner who picks a contractor because his bid is lower than all the other bids.
The Scam: Two contractors quoted $9,000 and $9,500. A third quoted $3,000. The homeowner chose the lower estimate of $3,000. She discovered that instead of putting pipes under her bathroom sink, he used garden hoses. By the time she discovered the major water damage, the service provider was long gone.
reKNOvate TIP: Think twice about hiring a contractor based solely on a low bid. Many times, lower quotes are another tactic used by scammers just to get the job. Once he has his foot in your door, to live up to that low price offer, he may diminish the quality of service by cutting corners somewhere else in your project. Or he may “create” other problems and tell you he “discovered” them which may end up costing you more than the original quote.
The Victim: A homeowner who meets with a salesperson and not the contractor.
The Scam: A senior met with a salesperson and signed a contract without knowing who the contractor was. The contractor was a roofer who had scammed several others in another state. He hired the salesperson to find him work.
reKNOvate TIP: Tell the salesperson thank you and decline to do business with anyone who won’t introduce themselves. You have a right to know who will be coming on your property or in your home before you sign any contract.
The Victim: A homeowner who believes the contractor when he says they don’t need a building permit.
The Scam: A contractor told a homeowner they did not need a building permit. However, the work did, in fact, require a permit. A neighbor noticed there was no permit notice posted and called the city to report it. Because the homeowner did not have a permit and the work failed to meet code, the city made the homeowner tear down the construction to the foundation.
reKNOvate TIP: Many permit requirements are posted online by local jurisdictions. You can always call your local building department to confirm whether or not a building permit is required for any or all of the work you need done. Many times, unlicensed contractors will try to scam you because they must have proper licensing to pull a permit. Also, you can have a contractor put it in writing if a building permit is not required.
The Victim: A homeowner who has to pay the contractor when he terminates the contract.
The Scam: A contractor was not doing the job as expected, would not show up and would not return the homeowner’s telephone calls. The homeowner ended the relationship and refused to pay the contractor. The contractor demanded he be paid 20 percent of the project cost, as stated in the contract, because the homeowner terminated the agreement. The homeowner went to court to explain his side. The homeowner lost.
reKNOvate TIP: You absolutely must read and understand, thoroughly, any contract before you sign it. Be sure to have an exit/termination clause in your contract that protects you if the contractor doesn’t show up, etc. This is where the expertise of an attorney is invaluable.
The Victim: A homeowner who is promised a 100-year warranty.
The Scam: A homeowner hired a contractor based on the 100-year warranty. She thought that was a great level of security. If she was not happy with the work or if there were problems, the work was warranted. When the cabinets came loose from the wall six months later, the homeowner discovered the contractor went out of business and the warranty was invalid.
reKNOvate TIP: Remember, a labor warranty is only good as long as that contractor is in business and willing to honor the warranty.
The Victim: A homeowner who tells a contractor how much money they have in their budget or how much the insurance company gave them.
The Scam: A homeowner told a contractor her budget was $50,000. When she got an estimate, it was $49,500. She attended our SmartPower workshop. Afterwards, she got two other estimates but did not reveal her budget: the quotes were $25,000 and $23,400.
reKNOvate TIP: Don’t tell them your budget! If you reveal this information, the contractor may find ways to maximize your project’s cost to your available money. If you tell him your budget is $80,000, how much do you think his estimate will be? How much money you have should have nothing to do with how much he charges to do the work. In some cases, when he asks what your budget is, he is trying to “qualify” you. We suggest you have a wish list of things you want to make it easier for him to give you a more accurate estimate.
The Victim: A homeowner who gets a loan from a lender the contractor recommends.
The Scam: A woman secured funding for her roof repair through a finance company recommended by her contractor. The finance company gave the check directly to the contractor who then installed the new roof on top of the damaged roof. The next time it rained, the senior’s roof leaked terribly. When her church member got up on the roof, he discovered that the work was extremely shoddy.
When the contractor didn’t return her calls, she stopped making payments on the loan, hoping he would return to correct his sloppy work. That never happened. Meanwhile, the lender obtained a judgment against her for the repayment of the loan.
reKNOvate TIP: In many instances, beware of contractors who try to convince you to use their lender. This should be considered a possible conflict of interest. Consider your own bank or a local credit union. Always make sure you know exactly what your loan terms are, especially the interest rate and how the funds will be disbursed. Be careful borrowing money from finance companies you have never heard of.
The Victim: A homeowner who thinks they are getting a deal from a contractor who offers them a discount on supplies/materials left over from another project.
The Scam: A contractor purchased extra supplies on the account of an unsuspecting homeowner. He then approached another homeowner and offered a 40 percent discount on those same supplies.
reKNOvate TIP: A good contractor typically estimates some waste (about 10 percent) on a project. Be wary of a contractor who has enough supplies left over to do another full job. They may have cut corners on the previous job or maybe they did a poor estimate. And if they overcharged or robbed the homeowner before you, what are you going to end up paying for to be used on a job after yours?
The Victim: A homeowner who is told their prospective contractor is a spiritual/faith-based business (he is a Christian, true believer, ordained by God to fix houses, etc.).
The Scam: A homeowner was approached by a contractor who told him he was a “Born Again Christian” and his business was Christian-based. When the homeowner agreed to hire the contractor and gave him money up front, the contractor never returned.
reKNOvate TIP: Scammers are now taking advantage of people by suggesting they are of the same faith in order to gain favor to do your project. Just because someone claims they are “faith-based” does not mean you should skip doing your due diligence (background research). We have received many reports from victims who were scammed or defrauded by their pastors, deacons, relatives, neighbors, etc. Remember, your project is a business transaction. If the contractor is of the same faith, you can always invite them to your church. But for heaven’s sake, don’t let your guard down.
The Victim: A homeowner who is offered a steep discount if they allow the contractor to use their home repair project as a “demo” for their neighbors to see.
The Scam: A contractor finished a homeowner’s basement in a new subdivision. The job was done very well and at a steep discount since the homeowner agreed to tell her new neighbors about the contractor’s work. Six of those neighbors liked the work and each gave the contractor a $6,000 deposit. The contractor took off with the money and never returned. The neighbors then assumed the homeowner was in on the scam.
reKNOvate TIP: Be careful. Many times, a “demo” can be a way for a dishonest contractor to get you, unknowingly, to help him with his scam. If you refer a contractor, always advise your neighbors to do their own background checks and caution them about giving money up front.
The Victim: A homeowner who sued his contractor and won.
The Scam: A homeowner was awarded $50,000 by the courts after he sued a dishonest contractor. He was excited to have won. However, six years later, the homeowner only received $198 of the $50,000 he was expecting.
reKNOvate TIP: Being proactive is key. It is crucial to check out the contractor as much as possible BEFORE you hire him. Getting a favorable judgment does not, by any means, guarantee that you will get reimbursed. You will have to continue to pursue the contractor to try to collect your money, all at your cost, and likely to no avail.
The Victim: A homeowner who hires a contractor who just shows up at their door uninvited.
The Scam: A contractor shows up uninvited at the door of a homeowner. He tells the homeowner, “…we’re in the neighborhood today to offer you a ‘special’, ‘discount’ or ‘free’ deal on any work you need.”
reKNOvate TIP: You should not use contractors who just show up at your door uninvited. You need time to perform your due diligence to see if they are a legitimate business. You should always find your own contractor. We recommend finding and screening a contractor before you need one.
The Victim: A homeowner who hires a contractor who comes to their door offering a free inspection.
The Scam: A pest control contractor came to a home and told the owner that he found “this piece of wood on the side of their home” which had heavy termite damage. He convinced the homeowner that they needed pest control treatment right away, and he had the deterrent on his truck. He said he could do the job at a discount if he could do it that day, while he was in the area. The wood was not from the homeowner’s home and the “treatment” was water.
reKNOvate TIP: Some operators are known to intentionally cause damage during their inspection. Should you invite a contractor to inspect any part of your home, don’t let them out of your sight. If the contractor finds something that needs to be done, let him see you take a picture of it so he understands that you will be very involved in any project. Tell him thank you but that you always get at least three estimates before you make any decisions. Don’t feel rushed to hire anyone.
The Victim: A homeowner who hires a contractor who is using another contractor’s license number.
The Scam: A contractor is not licensed in your state, so he uses the license number of a contractor who is. Sometimes with that contractor’s knowledge (they get paid) and sometimes without that contractor’s knowledge.
reKNOvate TIP: Make sure that any contractor who works on your home has his own license number. Verify his license information with your state licensing board.
And remember, what is the likelihood of him returning to fix any problems that come up after he has left town? If the contractor you used is from another state and he won’t return to fix a problem, is the contractor with the actual license going to come and take care of the problem? Something to think about.
The Victim: A homeowner who is offered a discount which is only good for the next hour or the next 24 hours.
The Scam: A senior agreed to a contractor’s discount. He gave the contractor $800. The contractor said he was going to his truck to get the supplies, and drove off.
reKNOvate TIP: Any sales representative or service provider offering a deal that is “good” for only one day or a few hours (pressure selling) is most likely trying to manipulate you or set you up for a scam. You should always have ample time to think about any offer, so don’t be bullied into making a quick decision you may later regret. Legitimate contractors will always give you time to check them out. Remember, your rush to save may end up costing you more if you select the wrong contractor. (An exception may be if a manufacturer offers a limited-time offer on a particular product and the offer is about to expire. In most cases this can be verified on the manufacturer’s website.)
The Victim: A homeowner who is approached by a contractor who tries to scare them into believing that if they don’t act right away, something terrible will happen.
The Scam: A contractor tells a homeowner that from the street he noticed that the house appears unstable on the left side and may collapse. He convinced the homeowner to allow him to contact their insurance company and file a claim, by offering to pay the homeowner’s insurance deductible.
reKNOvate TIP: Don’t let any contractor scare you into a hasty decision. Always be wary of sales people who try to scare you into signing for “urgent” repairs. If there is an insurance claim involved, tell your insurance agent what the contractor or salesperson is saying about the pressing need for getting your work done. If you are still unsure about how crucial your needs are, contact your local building department or a third-party inspector. Many times, especially after a disaster, you may need emergency repairs, such as having your roof tarped (covered) or a portion of your home secured. You can have someone just do that emergency work, which will buy you time to find a good contractor to perform more permanent repairs.
The Victim: A homeowner who is given a verbal quote by a contractor.
The Scam: A homeowner agreed to pay $3,000 for a job. Not taking the time to review the contract, he signs it. The contract stated the job would be $4,500. The homeowner told the contractor they agreed to $3,000 and he would not pay a penny more. The contractor filed a lien on the property.
reKNOvate TIP: Always insist on a written contract and read it thoroughly to make sure that every detail of the job is included. Be sure to keep the original or at least a copy of the contract. If you are unsure about anything regarding your contract, we highly suggest asking a legal professional to review the contract before you sign.
The Victim: A homeowner who signs what she thinks is a “waiver of liability” that allegedly protects her if the contractor gets hurt while doing an estimate.
The Scam: A roofer asked a homeowner to sign a document that authorized him to inspect her roof. He told her his insurance company required her authorization. She signed as requested. Afterwards, she was told that the document included a clause stating that if she did not use that particular roofing company for the job, she had to pay an “inspection fee” of $750 for the roofer’s evaluation and write up of the damage to her roof.
reKNOvate TIP: Don’t sign any document you do not read and understand. Don’t take their oral explanation. Read it yourself. Contact your insurance agent or consult an attorney to help you grasp the scope and limits of any insurance waiver or any other contractual document.
The Victim: A homeowner who hires a contractor who only takes cash.
The Scam: A young lady who only worked part-time for minimum wages hired a contractor to fix her heating unit. He told her he did not take credit cards or personal checks. She did not have any credit cards or a bank account so that seemed fair to her. She gave the contractor $200 cash to get supplies. She never saw him again.
reKNOvate TIP: This is another big red flag! Most legitimate contractors will accept a check or credit card. It is best to use a credit card, but if you must pay in cash, get an invoice that shows the name of the company, the contractor’s name, the date, your property address, the amount that you paid, exactly what you are paying for, and the contractor’s signature. Closely review the invoice and have it in your hand before you give the contractor your hard-earned money!
Note: Before you hire a contractor, always ask what forms of payment he accepts.
The Victim: A compassionate homeowner who falls prey to the contractor’s sob story.
The Scam: A contractor told a homeowner that he had four children and his wife was ill and he needed money up front to get groceries. He further stated that he would go the extra mile to make sure the project was on time if the homeowner would comply. The homeowner gave the money to the contractor and never saw him again.
reKNOvate TIP: Don’t fall prey to a “sob story” pitch. The service provider’s personal situation has nothing to do with the services you need. Don’t develop an emotional relationship with the contractor. This is a business transaction. If an attempt to pull at your heartstrings is made, you can always help him find local nonprofits or community organizations that can service his personal needs. You should not advance your project money to resolve a contractor’s personal problems.
The Victim: A homeowner who allows work to start before they get a contract signed.
The Scam: A homeowner was told by a contractor, who happened to be in the neighborhood, that he could give the homeowner a steep discount of $500 for the sealant to seal his driveway. The homeowner agreed. Once completed, the contractor says the price did not include labor, which was $1,500.
reKNOvate TIP: Never allow the contractor to start work before you outline in a contract, everything to be done and for what price. If the work is started before a contract is signed, the contractor can and may dramatically increase the price. Under most state law, if there is no written agreement and the contractor has improved your property, the contractor is entitled to be paid for time, materials and often profit and you are at risk of having a lien placed against your property for failure to pay. If the work is started without your permission, order the work to be stopped and if necessary, call the police.
Note: Everything in writing!
The Victim: A homeowner who is frightened or intimidated when they question the contractor about his poor workmanship, delay in responding, asking for more money, etc.
The Scam: A contractor did poor quality work. His attitude was menacing and intimidating, making the homeowner feel fearful about approaching him to discuss her concerns. She thought that reporting him to anyone, including the police, might bring more trouble to her.
reKNOvate TIP: If you are female, it is always good to have another person present when you deal with a contractor so the contractor is aware that you are not as vulnerable as he may have assumed. If you ever feel threatened or frightened, contact your local police.
The Victim: A homeowner who is asked for money up front by the contractor before he starts the project.
The Scam: After a tornado, a disaster victim was desperate to get back to normal as soon as possible. So he forked over 50 percent of the project cost, which the contractor required if the homeowner wanted his repairs done right away. He never saw the contractor again. He could not replace the money and he could not continue to pay rent on the temporary housing he secured and his mortgage at the same time. Since his home was too damaged to live in, he abandoned the property to foreclosure.
reKNOvate TIP: This is the biggest red flag of all! Some contractors will tell you they need money up front to pay for supplies and/or equipment. A number of consumer advisors suggest paying 10 percent of the project cost or $1,000, whichever is less, because, in fact, the contractor may need to purchase supplies. Some state laws regulate deposit amounts, some do not. In this book, we give you some options on how to handle the “money up front” issue.
The Victim: A homeowner who gives money upfront to a contractor to purchase supplies.
The Scam: A homeowner gave a contractor $8,000 up front to purchase materials. The contractor performed a small portion of the job, and then disappeared with the money. Having lost $8,000, the homeowner now has to come up with another $8,000 to have someone else do the job. If he hires an attorney, that means additional monies to pay court costs and attorney’s fees. Even if he wins in court, the homeowner may never recover his money. This is an unfortunate situation that can be easily avoided!
reKNOvate TIP: Chances are the contractor is getting your supplies at a local store. Many times, you can meet him at the material supply store and pay for the supplies yourself. If he insists that he will get the supplies cheaper if he purchases them, you can always make your check out to the supplier. That way, he cannot take off with your money. And make sure you get a copy of all receipts.
The Victim: A homeowner who doesn’t stay with the contractor while he prepares an estimate.
The Scam: A homeowner had two guys knock on her door offering a “free inspection” for general work on her home. While one talked to her in the backyard about redoing her deck, the other slipped in the front door she just came out of and stole her jewelry and laptop.
reKNOvate TIP: Make sure you follow any potential contractor around your home while they prepare an estimate. If more than one person shows up at your home, keep your eye on both of them. If you come out of your home, always lock the door behind you so no one can enter while you are not looking. Always be careful and be sure to avoid putting yourself in a vulnerable or dangerous position.
The Victim: A homeowner who doesn’t pay attention when a contractor unlocks a window.
The Scam: A homeowner, getting an estimate from a potential contractor, stepped away for a quick moment to grab her cell phone. Two days later, when she came home from work, she discovered her jewelry was gone. She called the police and it was determined that there was no evidence of forced entry. The contractor unlocked her window when she wasn’t looking.
reKNOvate TIP: Make sure you check all your windows/doors to make sure they are all locked after any prospective service provider leaves your property.
The Victim: A homeowner who loves it when the contractor says he will pay their insurance deductible or that he will fill out their insurance paperwork for them.
The Scam: After convincing a homeowner that he was an expert at dealing with insurance companies and getting them to pay claims, a contractor filed an insurance claim on behalf of the homeowner. When the insurance company’s adjuster came to do an inspection, it was determined that the claim was fraudulent. The insurance company canceled the homeowner’s policy.
reKNOvate TIP: Be very careful. Your insurance policy is between you and your insurance company. Any misrepresentation or outright fraudulent acts committed by the contractor may negatively affect you. For example, if you have a contractor who advises he will pay your insurance deductible, this may be prohibited by your state’s regulatory agency or your insurer, so be very careful. Immediately contact your insurance agent for guidance because you may become a party to fraud and not even know it. Don’t risk having your homeowner’s policy canceled by your insurance company or being held accountable for a fraudulent claim. Remember, the motive for a contractor to collect on your insurance is to make a profit. He may ask you to sign falsified claim documents, and he does not care about the impact a false or fraudulent claim may have on you.
The Victim: A homeowner who asks for the contractor’s certificate of insurance but does not call the phone number on the certificate to verify coverage.
The Scam: An attorney smartly asked a contractor to show him his insurance card. Satisfied that the contractor had appropriate insurance coverage, he okayed the work to be done. When a day laborer fell off the roof, the homeowner discovered that the contractor had not paid his premium in over three months.
reKNOvate TIP: Call and verify that the contractor has an active policy for appropriate coverage with the insurance company listed on his insurance card. If you need help with this process, your personal insurance agent can help you verify that the contractor’s policy is active and current, as well as the extent and appropriateness of coverage.
Note: Make sure that the contractor will have appropriate insurance coverage through the end of your project. For instance, if your project will take 3 months, make sure the contractor has coverage for the entire 3 months.
The Victim: A homeowner who believes a salesperson or contractor who knocks on their door and tells them that there is hail damage to other homes in the neighborhood and they too, most likely need a new roof.
The Scam: A couple hired a roofer who came to their door and said that they had hail damage. The couple’s neighbors hired the roofer so the couple agreed to hire him too. The couple gave him $7,000 to purchase materials and begin working to replace the roof. The contractor worked for two days and did not return. Then it rained. The weather damage inside the home required even more work and damaged their possessions, costing over $150,000.
reKNOvate TIP: Contact by uninvited service providers is always a red flag. You should always find your own contractor. If you are told you have hail damage, walk around your house and see if you have damage at ground level. Are there dents in your air conditioning unit or your car in the driveway? If not, then chances are you may not have roof damage. Never let anyone up on your roof without you being present because that individual can easily “create” damage.
The Victim: A homeowner who sees a local phone number on the truck and assumes the contractor is local.
The Scam: The potential service provider has a local phone number listed on his truck, but his license plate is from another state. A homeowner hired a contractor he thought was local because of his local phone number. A few months later, when problems started, he called the number only to discover it was disconnected.
reKNOvate TIP: Be very suspicious of contractors who list local telephone numbers but drive vehicles with out-of-state license plates. Chances are this contractor is from another state and obtained a local phone number to appear he is local. What are the chances of him returning if something goes wrong with the work he did on your home? If for any reason you decide to use this contractor, be sure to write down his license plate state and number, and take a picture of him; yes him, and his vehicle.
The Victim: A homeowner who paid for upgraded materials, but the contractor installs lower quality, cheaper products.
The Scam: Unaware, a homeowner paid for a special grade of carpet, but a lower grade was installed. When the carpet started to unravel, the homeowner got his copy of the invoice and went to the retail supplier to complain. The supplier sent an inspector to the property to investigate. They discovered that the carpet that was installed was not the carpet that was purchased. It wasn’t even the same color of “tan.”
reKNOvate TIP: Ask to see all invoices, paperwork, and warranties for all materials used so that you can confirm that you are getting exactly what you paid for.
The Victim: A homeowner who hires a contractor who insists he can do it all.
The Scam: A homeowner happened to mention to his plumber that he wanted to have a wheelchair ramp installed for his disabled sister. The plumber told the homeowner he could do it for less than anyone else. Since the plumber did a great job on the bathroom sink and installed the toilet perfectly, the homeowner hired him to put on the ramp. The plumber did not bother to get a permit for the ramp and knew nothing about weight distribution. When the sister used the ramp for the first time, part of the ramp collapsed. The homeowner called the plumber but he never returned his calls.
reKNOvate TIP: Be sure to ask the contractor what he specializes in. It might be a good idea to ask him what he specializes in before you tell him what you need done.
These are just some of the scams we are aware of. If you know of any other scams, contact us and let us know. Thank you for helping us protect others!