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 Real Estate Blog 
Tuesday, September 27 2011

Crooks go where the money is. So with Americans spending as much as $22 billion a year on construction projects, it’s no surprise that home improvement has become a favorite target for fraud artists. Some of these shady characters use amazingly well-polished contractor scams that are tricky to spot until it’s too late.

The vast majority of contractors are honest, hardworking professionals. Protecting yourself against the few bad apples requires checking references, having a solid contract, and being alert to the warning signs of these top five contractor scams.

Scam 1: I’ll need the money up front

This is the most common ruse reported to the Better Business Bureau. Your contractor explains that because he has to order materials and rent earthmoving equipment to get the job started, he needs, say, 30% to 50% of the project price up front. Once you’ve forked over the dough, one of two things happens: He disappears on you, or he starts doing slapdash work knowing that you can’t really fire him because he’s sitting on thousands of your dollars.

How to protect yourself: Never prepay more than $1,000 or 10% of the job total, whichever is less. That’s the legal maximum in some states, and enough to establish that you’re a serious customer so the contractor can work you into his schedule—the only valid purpose of an advance payment. As to the materials and backhoe rentals, if he’s a professional in good standing, his suppliers will provide them on credit.

Scam 2: Take my word for it

When you first meet with the contractor, he’s very agreeable about doing everything exactly to your specifications and even suggests his own extra touches and upgrades. Some of the details don’t make it into the contract, but you figure it doesn’t matter because you had such a clear verbal understanding.

Pretty soon, you notice that the extras you’d discussed aren’t being built. When you confront the contractor, he tells you that he didn’t include those features in his price, so you’ll have to live without them or pony up additional money to redo the work.

How to protect yourself: Unfortunately, you have no legal recourse because you signed a contract that didn’t include all the details. Next time, make sure everything you’ve agreed on is written into the project description. Add any items that are missing, put your initials next to each addition, and have the contractor initial it, too—all before you sign.

Scam 3: I don’t need to pull a permit

You’re legally required to get a building permit for any significant construction project. That allows building officials to visit the site periodically to confirm that the work meets safety codes.

On small interior jobs, an unlicensed contractor may try to skirt the rule by telling you that authorities won’t notice. On large jobs that can’t be hidden, the contractor may try another strategy and ask you to apply for a homeowner’s permit, an option available to do-it-yourselfers.

But taking out your own permit for a contractor job means lying to authorities about who’s doing the work. And it makes you responsible for monitoring all the inspections—since the contractor doesn’t answer to the inspector, you do.

How to protect yourself: Always demand that the contractor get a building permit. Yes, it informs the local tax assessor about your upgrade, but it weeds out unlicensed contractors and gives you the added protection of an independent assessment of the work.

Scam 4: We ran into unforeseen problems

The job is already under way, perhaps even complete, when this one hits. Suddenly your contractor informs you that the agreed-upon price has skyrocketed. He blames the discovery of structural problems, like a missing beam or termite damage, or design changes that you made after the job began.

The additional fees might very well be legit, but some unscrupulous contractors bid jobs low to get the work and then find excuses to jack up the price later. If you’re unsure whether your contractor is telling the truth about structural problems, you can get an impartial opinion from a home inspector, the local branch of the National Association of Home Builders, or even your local building department.

How to protect yourself: Before signing the contract, make sure it includes a procedure for change orders—mini-contracts containing a work description and a fixed price—for anything that gets added to the job in progress. The extra work, whether it’s related to unforeseen building issues or homeowner whims, can proceed only after the change order is signed by both homeowner and contractor.

Scam 5: I’ve got extra materials I can sell you cheap

This hoax is usually run by driveway paving companies, whose materials—hot-top asphalt and concrete—can’t be returned to the supplier. So the crew pulls up to your house with a load of leftover product and quotes a great price to resurface your driveway on the spot.

Even if it’s really a bargain (by no means a sure thing), taking them up on the offer is risky if you have no idea who they are and haven’t checked references. And if the driveway starts cracking next year, you can bet you won’t find this bunch again.

How to protect yourself: Never hire a contractor on the spot, whether it’s a driveway paver, an emergency repairman who shows up after a major storm, or a landscaper with surplus plantings. Take your time to check contractors out to make sure they have a good reputation and do quality work.

A former carpenter and newspaper reporter, Oliver Marks has been writing about home improvements for 16 years. He’s currently restoring his second fixer-upper with a mix of big hired projects and small do-it-himself jobs.


Posted by: Rolando Trentini AT 08:00 am   |  Permalink   |  Email
Wednesday, June 09 2010

Working with a contractor takes effort and know-how in order to keep your project on time and on budget.


You’ve chosen a great contractor, you have a clear and well-designed project plan, and now you’re ready to sit back and watch your dreams become a reality. Unfortunately, the hardest part of your job has yet to begin. No matter whom you’ve hired to construct your home improvement project, you’re going to have to actively manage the process in order to keep it on target, on time, and on budget.

Get apathetic or lose your focus for even a single day and you may pay for it—quite literally. Here’s what you need to know to stay organized and maintain strong communications with your contractor and construction team.


Avoid allowances

An allowance is a line item in the contractor’s bid for something that’s yet to be determined. Let’s say you haven’t chosen your plumbing hardware for your new master bathroom or the decking you’ll use for your new three-season porch. The contractor will put a number in the budget as a placeholder. But with such a wide range of price points for these products, his guess may be far lower than what you wind up spending, which can lead to cost overruns. Try to eliminate allowances by sorting out all of your material and product selections before the contractor gives you an itemized bid for the job. Otherwise, at least do enough shopping to give the contractor an accurate ballpark price for the materials you’re considering.

Establish a communication routine

Ask the contractor how he prefers to communicate with you. Depending on the size of the job and how his team operates, he may say that he’ll be on site to talk with you every morning before you leave for work. He may give you his cell phone number and say, “call me anytime,” or tell you that his foreman can handle whatever comes up. In any case, try to meet with the project leader at least once a day. This is an opportunity for you to hear progress reports and find out what work is scheduled over the coming days—and to ask your questions and voice any concerns you have.

Keep a project journal

Part scrapbook, part diary, part to-do list, a project journal will help you stay organized. Use a notebook to record progress, note things you want to ask your contractor, jot down ideas, record product order numbers, and anything else that comes along. It’ll help you keep things on track, communicate with the team, and provide a record of exactly who said what when—which could help you iron out disagreements later on.

Track all changes in writing

No matter how thorough your planning is, your home improvement job will inevitably evolve as it moves along. You may encounter unforeseen structural issues, or you may decide to include additional work as you see the project take shape. Any good contractor can handle these changes—just make sure that he bids them in writing first. Tell the contractor at the outset (and put in the contract) that you want to sign off on written change orders for anything that’s going to add to the bottom line of the job. That means he has to give you a bid (a description of the change and a fixed price for what it will cost) and you both have to sign it before the work is done. This eliminates the risk of expensive changes happening without clear communication about how much more you’re spending, and it helps you keep track your bottom line from one change to the next.

Check their work

It’s much easier to nip problems in the bud than to undo mistakes after the fact, so try to be proactive about checking your contractor’s work. As fixtures arrive on site, compare the model numbers on the boxes against your receipts, invoices, and the contractor’s bid to ensure that the right product was delivered. As walls get framed, check their locations and the locations of window and door openings against the blueprints. To the extent that it’s possible, conduct these investigations after hours or during lunch breaks so you don’t seem like you’re looking over the workers’ shoulders (even though you are).

Pay only for completed work

Money is power. As soon as you’ve paid the contractor, you no longer have the upper hand, so it’s crucial that you keep the payment schedule in line with the work schedule. The contract should establish a series of payments to be made when certain aspects of the job are completed. For example, your contract could stipulate that you’ll pay in three equal installments, with the last payment to be made after the project is complete, and after you and your contractor agree the work is satisfactory. Never put down more than 10% upfront; that’s too much cash to hand over before any work is complete. Your contractor should be able to get any necessary supplies on credit.

Be a good customer

One of the best ways to get quality work out of a construction crew is to make them enjoy working for you. That means being decisive with the contractor—and giving him a check promptly at the agreed-to points in the project. It also means being friendly and accommodating of the workers in your house: designating a bathroom that they can use, greeting them by name each morning, and perhaps serving them cold lemonade on a hot day. Complimenting their work (as long as you feel it’s worthy of praise) can be a great way to motivate them to do their best for you.

A former carpenter and newspaper reporter, Oliver Marks has been writing about home improvements for 16 years. He’s currently restoring his second fixer-upper with a mix of big hired projects and small do-it-himself jobs.


Posted by: Rolando Trentini AT 01:57 pm   |  Permalink   |  0 Comments  |  Email
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