How to avoid common contractor scams

Angie’s List published a great infographic earlier this month that offers advice on how to avoid three common types of contractor scams. According to the Census Bureau, Americans spend $33 billion on home improvements and $135 billion on home maintenance each year. Much of this work is provided by independent contractors, who in most cases are trustworthy business people, but in other cases (such as this one) are not.

PaySAFE acts as a do-it-yourself closing table that holds both parties accountable for a contracting transaction. Using PaySAFE ensures the money will only be exchanged once the details of the transaction are completed and approved by both parties. We offer the tools and you do the work; our paperwork-free online tools are free and easy to use and act as a neutral third party which provides transparency during the entire transaction.

For more information on how PaySAFE can work for your next major home improvement project, check out our How it Works section of our website.

Here’s a rundown of the three common contracting scams and how to avoid them (via Angie’s List):

Scam 1: “Pay up and hope that I show up” — It’s common practice for a contractor to ask for a down payment to begin the job, as it will help them buy the necessary materials to complete the work. However, when a contractor asks for a large sum of money upfront (one-third or more of the total cost), it should raise concern. In the worst scenario, the so-called contractor will eagerly collect your check, quickly deposit it and never show up again. Angie’s List also notes how 75% of contractors are willing to negotiate the down payment terms.

Scam 2: “Bait and switch” — Be extremely cautious once a contractor suddenly raises the cost of the job after the contract is signed. Sure, sometimes this is a legitimate scenario (e.g., a recent spike in the cost of building materials) but oftentimes it’s simply the contractor taking advantage of the homeowner. To avoid bait-and-switch situations Angie’s List says it’s key to get as much information as possible written in the contract, including start and completion dates, payment penalties for missed completion dates and an itemized materials list and warranty information. Oh, and BE SURE you read the ENTIRE contract before signing it.

Scam 3: “What paperwork?” — Unlicensed contractors often are cheaper, but bring with them several other issues that can cost the homeowner in the end. So be sure to only work with licensed contractors, demanding that they procure the necessary building permits before they start the job. Also, ask to see a certificate of insurance and call to verify it. This can save you in the end if someone is injured on the job on your private property. Contractor license requirements vary state by state and city by city, so being familiar with the local laws is a definite plus.

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