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Making Repairs or Renovating? 5 Ways to Avoid Contractor Scams

Mar 13, 2021 by Aly J. Yale
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Most property owners will need a contractor at some point. In some cases, it may be for some sort of renovation or aesthetic upgrade. In others, it might be an urgent necessity -- borne out of a natural disaster like a flood, hurricane, or severe winter storm, as we saw a few weeks ago here in Texas.

Whatever the reason, it's important to be choosy about which contractors you decide to work with -- particularly in crises. In these scenarios, when contractors are in high demand and low supply, property owners and real estate investors are more vulnerable to scams (not to mention price gouging and shoddy workmanship.)

In fact, the Better Business Bureau has even warned Texans about potential scams following February's big storm, writing in a news release: "After a disaster, it is important to be diligent and watch for scammers looking to take advantage of areas recently impacted by severe weather, also known as storm chasers. Going door to door, they offer their services but disappear after accepting payment."

Are you planning to hire a contractor to renovate or repair your property? Just want to be prepared for the future? Take these five steps to avoid contractor scams next time you need one.

1. Be wary of door-to-door visitors

If a contractor comes to your door offering their services, be cautious. There's a reason they're not currently on a project -- and going door-to-door? That typically signals desperation or, in the case of a storm, opportunism.

That said, not all contractors who knock on your door are shady, but do your due diligence before deciding to work with one. Ask for references, check them out online, and get examples of their work before taking one step further.

2. Never pay for work upfront

It's pretty common for contractors to ask for a deposit or upfront fees for materials. But if they ask for the full payment on Day 1 -- before any work has been done? Run for the hills (that's probably what they'll do after you pay them!).

If a contractor asks for money upfront, it should only be a small portion of the final expected bill. If they ask for more than that, question the practice, and consider looking for another option.

3. Question 'specials' or time-sensitive 'sales'

Is a contractor offering a "this week only" special or sale? Are they pressuring you to pull the trigger now in order to get some sort of discount? Again, these are signs the contractor is trying to take advantage of your need -- or your budget constraints.

Another consideration: Could the repair or project even be done -- at least properly -- in that tight timeframe? You don't want to sacrifice quality work just to save a few dollars.

4. Always ask for licensing and insurance

When considering a contractor, always ask to see their license and proof of insurance. Licensing ensures they're properly educated in their field, and insurance keeps you from being held liable if there's an accident (possibly a staged one) on your property. You can also check with your state's licensing board to see if there have been any complaints against the contractor.

5. Do some background research

Finally, before you hire a contractor, do some research. Check the Better Business Bureau website for ratings, complaints, and actions against the company. Search for reviews, too -- Facebook (NASDAQ: FB), Google (NASDAQ: GOOGL), and Yelp (NYSE: YELP) are good options here.

You should also ask the contractor for a few references and call each of them personally. Was the work quality and worth what they paid? Could they share pictures of the project? Most importantly, would they use the contractor again? If they say no or are unsure, it's probably best to find another option.

The bottom line

Contractor scams are more common than you might think -- especially after a big storm or localized disaster. Next time you need a contractor for work on your property, vet your options carefully, and keep your money -- and your personal details -- to yourself until you've verified the contractor is reputable and legitimate.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Aly Yale has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Facebook. The Motley Fool has a disclosure policy.