Blogs > Contractor SCAMS!

Contractor SCAMS!

May 05, 2016 - 11:39


As a real estate investor and homeowner you will be involved in many home renovation projects that will require detail, time and money. Above all you will most likely be dealing with contractors and that is where you will need to be extra cautious. Home improvement is a $200 billion industry every year, so inevitably there will be some “contractors” willing to deceive in order to take from the big money pot. Now, we are not saying all contractors are bad, the vast majority are honest hard working professionals but there are a few bad apples out there that you will need to watch out for. Here are a few things to keep a look out for.


Research your contractor.

One of the most important steps you should take before hiring a contractor is to always do research on the contractor or the company they work for and there are many ways to do that. But before we get to that, let me explain that sometimes family or investors will refer a contractor but that does not guarantee that they will do a great job. If you take a referral it would be smart to contact their references, get their testimonials and make sure they have a permit. Here are also other ways of doing your research.

  • Ask for the contractor's license number to verify with your state's Department of Professional Regulation, or your contractor's state license board or similar office.
  • Contact the Better Business Bureau where the company or contractor operates and check for complaints.
  • Check online or their website for any information on the company or the contractor.

Do not pay 100% up front

There are a few known cases where a contractor asks a homeowner for a large sum of money before he gets started on the job and once he receives it, he is never seen again. For example, in the last year from East King County there have been many paving scammers targeting local property owners. They take a payment of $5,000 from the owner to start working on their parking lot. Once they receive it they are never seen or heard of again and they walk away with $5,000 in their pockets. When hiring a contractor, it is common for them to ask for a down payment but never offer more than 15%-20% of the job cost. The rest of the payments should be paid during the project and at the end to make sure the job is getting done correctly. If a contractor demands a huge percentage of the job payment before they start, that should raise a red flag and you should probably seek out other options.


Clear Proposal

When going over the renovation details with the contractor make sure that you write them all down and don’t just take the contractors word for it. They will be very agreeable about doing everything but if it is not all written in the contract then there are a few things that can happen. You might see that the details left out the contract are not being built or fixed and the contractor will say that those details were not included in the final price. So you will have to pay extra, or even a fee, for the rest of it when it should have been done in the first place. Or you might even have to look for other contractors that will do the work for a lower price. Even if you tried, you have very few legal options against your contract because you signed it and didn’t include the details. Make sure all the details are thoroughly written and included in pricing.


Rushed into project

Oftentimes scammers will quote you an extremely low price for a very expensive job. They will mention that it is a one-time offer only and if you don’t accept you will not get this quote again. What happens most of the time is that they will require you to put down a payment at that exact moment with your credit card information or even cash. You will be pushed to make this payment but like I said before, making a full payment or even a large down payment should already alert you that it is not a good idea. Be on the look out for this type of approach.


Through the process make sure to keep good contact and update with the contractor to make sure all is going well with the projects. For investors, its good keep track of your contractors that do a good job because those are the ones you will want to keep in your team for other investment homes. Overall, be on the look out for any red flags I just mentioned to keep you from loosing any money to scammers.