8 Red Flags When Choosing a Contractor

Planning a home renovation? Recovering from a storm? When you need a contractor to do work on your home, the last thing you need is for something to go wrong. Unfortunately, a dishonest contractor can derail a whole project, leading to higher costs, longer completion times, and greater stress. Avoid the pitfalls of a contractor scam by identifying red flags.

1. The contractor goes door–to–door seeking repair work after a severe weather event.
   
   Storm–chasing contractors are poised to take advantage of desperate homeowners after a disaster. These contractors may use high–pressure tactics, like setting time limits on their estimates or suggesting that waiting to have work done could lead to higher prices in the long run. To avoid falling victim to this scam, contact your homeowners insurance company as soon as possible after you experience damage to your home. You may take necessary steps to reduce further damage, but do not start repairs until after you have heard from your claims representative. Avoid using door–to–door contractors, and seek local, reputable businesses instead.

2. The contractor requires a large down payment before starting work.
   
   If you offer too much money up–front, you run the risk of the contractor disappearing without completing the job. Finding a new contractor to pick up the pieces could increase your overall costs and timelines. Before the work starts, expect to pay a down payment of approximately 20–25% of the total cost of the work. A contractor might also reasonably request a deposit for the cost of bigger items, like countertops or cabinets.

3. The contractor estimates a price significantly lower than other bids.
   
   Some deceitful contractors might offer a “bait–and–switch” price to gain your business. Then, throughout the course of the project, they charge a higher cost for the actual price of materials or labor. The end result is a total bill that is substantially higher than expected. Alternatively, the lower cost of the work might mean lower quality materials or finishes.

4. The business has low reviews or no references.
   
   Research the contractor before accepting their bid. Prior work is the best indication of future work. If other homeowners have reported poor quality, deceitful business practices, or problematic behavior, steer clear! Similarly, it is also a red flag if there are no online reviews or the contractor can provide no references. Businesses can attempt to “clear their name” by closing a poorly performing business and starting up again under a new name. One sure sign of this is when there are no online reviews at all.

5. The written estimate or contract is nonexistent, vague, inaccurate, or predatory.
   
   The contract should list the scope of the work, along with the contractor’s responsibilities, payment schedules, and start and stop times. It can also include the materials, equipment, vendors, and subcontractors that will be used. These details help to ensure that your estimate is accurate and you will receive the results you expected. Do not sign a contract that has blanks in it.
   
   Additionally, the National Insurance Crime Bureau warns against contract provisions or Assignment of Benefits forms that would sign away your rights to any homeowners insurance claims to the contractor.2 If the work is relating to a claim, you should communicate directly with your insurer. You do not want the contractor to inflate claims costs on your behalf.4 The contractor should not interpret your policy for you or prevent you from reporting a claim.

6. The contractor does not provide their license or proof of insurance.
   
   An unlicensed or uninsured contractor is someone to stay away from! Ask to see their license, confirm that the name on the document matches the name of the contractor, and verify the license number against your state’s licensing agency website. Request proof of workers’ compensation and a businessowners policy or general liability insurance.
   
   If the contractor asks you to obtain any permits required for the work, it could mean that they are unlicensed. Note that the permit holder is responsible if anything goes wrong with the project.5 This responsibility should be the contractor’s. Similarly, confirm that all necessary permits have been obtained before the work begins.

7. The contractor submits false bills.
   
   Keep an eye on invoices to confirm that the materials and labor are billed as expected. Inspect all work to confirm that the work you paid for was completed using the correct materials. If there is a surplus of materials, you should receive a refund or the ability to return the excess to the original seller.
   
   Additionally, stay vigilant for any contractor attempting to perform unnecessary repairs or submitting false damage reports. Altering reports to inflate costs is a form of insurance fraud.

8. The contractor requests cash payments or does not provide receipts.
   
   Submit payments by check or credit card and request a receipt whenever you pay by cash. Having proof of payment can protect you if the contractor attempts to get more money after you’ve paid.

Sources

1. Avoiding contractor fraud: Essential tips and red flags (n.d.). CBIZ. cbiz.com

2. Dishonest contractors targeting homeowners after recent catastrophic weather events (January 18, 2023). National Insurance Crime Bureau. nicb.org

3. Red flags of fraud (n.d.). Office of Inspector General, U.S. General Services Administration. gsaig.gov

4. Scam alerts (n.d.). Coalition Against Insurance Fraud. insurancefraud.org

5. Williams, Terri (March 14, 2022). Look for these 12 red flags to avoid hiring bad contractors. Architectural Digest. architecturaldigest.com

6. Yale, Aly J. (September 27, 2023). Home improvement contractor scams: The red flags to watch out for. US News & World Report. realestate.usnews.com