How to Work With a Contractor and Not Get Ripped Off

What could be worse than a natural disaster coming through your area and seriously damaging your home? It seems that nothing could: you’ve got water or mud in your home, the roof is leaking (or has a big hole on it), and the siding is full of dents. You survived the storm and it can’t get worse than this. Or can it?

The only way to make that scenario worse is to get ripped off by a contractor that takes your insurance money and disappears into the night. It’s a sad story, but you hear about people getting ripped off after every single storm, tornado, or other natural disaster that hits a widespread areas. Con artists sweep in, grab as much money as they can, and disappear. And unfortunately, the insurance on your home doesn’t cover you in case of loss through fraud. It’s gone forever.

Photo by Piddelville via Flickr

How to Protect Yourself from Contractor Fraud

The worst part about contractor fraud is getting ripped off for thousands of dollars and risking losing your home because you can’t repair it. The next worst part is that it is very simple to avoid getting ripped off.

Be Cautious

Don’t be shocked when con artists come knocking on your door after a natural disaster. Expect it and have questions ready for them. Any time something bad happens on a large scale your skepticism radar should be on high alert. If it sounds too good to be true, it probably is.

Look for License and Bond

You’ve seen it before on the side of a truck “Licensed and Bonded”. Don’t work with a contractor that isn’t licensed or bonded. The license shows they are qualified to do the work, the bond shows they are legitimate and the job will be done (either by them or through a company the bond firm ends up paying to complete the job).

Ask for References

This is where it is easy to yawn and ignore the advice because it requires work. You should get 3-5 references from recent jobs the contractor completed. Don’t just ask for positive references. Ask to speak to someone that wasn’t 100% pleased with the work. They know who it is, and if they stand by their work they shouldn’t have a problem explaining the situation and letting you talk with the customer.

One key: once they give you references… check them!

Never, Ever Pay 100% Up Front

Here’s how the scam works: truck pulls up to a storm ravaged area with a sign on the side of it and a ladder in the back. The “contractor” knocks on your door, promises you impossible things about when the work will be complete, how quickly, and how great of a job it will be. But they need to be able to buy the supplies up front to do the job. They’re willing to cut you a deal, but only if you pay 100% up front for not only the materials but the cost of the job.¬†You happily hand over your check, so glad that you found a contractor before the rest of your city did. Your house is going to be done first!

And then the contractor never comes back. Your insurance money is gone… deposited into his bank account or cashed and sitting in his truck. You’ll never get it back, and the job will never be completed.

Pay in Installments

Instead of paying 100% up front, you should stagger your payments based on completion goals. Sure, you might cut a small portion up front to buy supplies, but that’s it. The next chunk of payment comes when the work is done, and the last chunk of payment comes when you are satisfied with the work. There are different schedules you can come up with, but the basic idea is to break up the money you give to the contractor based on the progress toward finishing the repairs on your home. That way if the job is left undone, you still have cash left over to hire a legitimate contractor to finish the job.

About the Author

By , on Aug 24, 2011
Kevin Mulligan
Kevin Mulligan is a debt reduction champion with a passion for teaching people how to budget and stay out of debt. He's building a personal finance freelance writing career and has written for, Discover Bank, and many others.

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