Contractor Fraud Warning Signs

There are thousands of legitimate, ethical contractors in business. Unfortunately, there are also scam artists who pose as legitimate contractors. These smooth operators, “storm-chasers”, often show up in communities that have been impacted by natural disasters.  They prey on distressed homeowners asking for up-front payments for shoddy repairs or work that they will never show up to perform.

Here are some warning signs to look out for:

All professional contractors should be insured and able to show their certificate proving such insurance. Although all states do not require licensing, contractors in states requiring licenses should have it and be able to provide a copy. If you’re a handyman, general contractor, remodeler, or builder, you don’t need a contractor license in Texas.  Contractors that specialize in certain trades such as plumbers, electricians and HVAC technicians need to hold a Texas contractor license.

Contractors that ask you to sign anything before you’ve hired them. If they want you to sign an “estimate” or “authorization” before you’ve made the decision to hire them, look out. They may be trying to get you to sign an actual binding contract.

A contractor that doesn’t write contracts. Professionals have clear contracts that outline the job, process, the cost, and help clarify how problems will be managed. If you don’t have a contract, you are not protected when something goes wrong. Don’t hire anyone who does not allow you to review the contract or agreement, refuses to give you a copy, or tells you a contract “won’t be necessary.”

Requires cash or payment in full before starting the job. Shady contractors demand cash and then run with the money. Many homeowners have been stranded by paying in full up front. A deposit towards materials is common, but only pay it once you have a contract signed by both you and the contractor. It’s also suspect if you’re asked to pay cash to a salesperson instead of a check or money order to a company.

Vastly underbids all other contractors. They may have the best price, but that doesn’t guarantee the best skill. This can end up costing you more when you have to have the substandard work redone. As Ben Franklin said, ‘The bitterness of poor quality remains long after the sweetness of low price is forgotten.’

Cannot provide customer references. Professional contractors should have current references they can provide from current and past clients — and you should be able to reach those references, not just an answering machine.

Difficulty contacting the contractor. Professionals should have a physical office, mailing address, phone, and email. Verify the contractor’s business address through Google. If they only have a P.O. box, be wary. Don’t be afraid to ask any contractor or salesperson for their driver’s license for proof of identity. Search the Better Business Bureau to see if any complaints have been made against the company.

Tells you to obtain the building or remodeling permits. Professional contractors go to the county or state offices and get permits for their work themselves. Asking the homeowner to do it is a sign that they are not legitimate contractors.