Don’t Get Ripped Off by Home Improvement Scams!
Most of us, as we age, prefer to live independently in our homes and communities. But, as any homeowner knows, homes often need repair or renovation. A home repair or improvement project can be overwhelming and senior adults are the most at-risk when it comes to fraudulent contractors and home improvement scams. Scammers often target seniors by offering their services for what sounds like a good deal, only to take the money and run.
Home improvement scams can jeopardize your independence because they can rob you of money, equity in your home or even a safe place to live. Below are some tips and resources to help you avoid being the target of a home improvement scam.
What Is a Home Improvement Scam?
Scam artists target homeowners in a variety of ways, causing them to lose thousands of dollars and even their homes. Strategies scam artists often employ include:
• Using high-pressure tactics to sell a range of services such as roof, sidewalk and driveway repairs
• Charging inflated prices
• Delivering sub-standard work
• Posing as a building inspector or other official so they can demand immediate repairs
• Obtaining funds to pay for services by urging the homeowner to work with a certain lender or advising them to get a reverse mortgage
• Identifying potential victims by scouting out neighborhoods (most notably after natural disasters), then targeting vulnerable older adult homeowners
Why Are Older Adults Targeted?
With over 50 million Americans age 60 and older, older adults are prime targets for financial exploitation, both by people they know and trust and by strangers. Financial exploitation is believed to cost older adults over $36 billion annually.
• Older adults are most likely to have a savings account, own a home with equity and have excellent credit.
• Older generations of Americans were generally raised to be polite and trusting, traits that can be exploited.
• Older adults are less likely to report a scam because they may not be aware that they’ve been defrauded, are ashamed, don’t know how to report it or are concerned loved ones will assume they can’t manage their finances.
• Older victims are perceived to be unreliable witnesses, in part because of age-related memory loss.
Profile of a Scam
An 80-year-old widow living on a fixed income is approached by a “friendly” contractor who says her roof needs repair. The contractor says the entire roof and some beams must be replaced; he will fix it for a senior-discounted rate of $8,000 and will arrange financing. He removes most of the roof and secures a loan for $27,500 at an exorbitant 16 percent interest rate, a significantly higher cost because he claims the work was more extensive than originally estimated. She signs the contract under the threat that the contractor will abandon the project and place a lien on her house. After the repairs are completed, the roof leaks more than ever and the floors and walls are damaged. The work is so shoddy that she stops making loan payments. The loan company serves her with foreclosure papers.
Check to be Sure Your Contractor is Licensed
Most states – including Maryland, Pennsylvania, Virginia, and the District of Columbia – require residential contractor licensing, but many other states do not. If you live in one of these states, be especially careful about how you choose your contractor because your legal recourse, should problems arise, may be limited.
How Do You Spot a Scam Artist?
You should probably be suspicious of a contractor with the following behaviors:
• Works door-to-door, suggesting they are working on other homes in your neighborhood
• Doesn’t provide contact information or refuse to show identification
• Pressures you for an immediate decision
• Only accepts cash and asks that you pay the full amount up front
• Offers to finance the costs or suggests that you borrow money from a lender they know
• Poses as a building inspector and orders immediate repairs that they offer to do on the side
• Is not licensed
What Should I Do If I’ve Been Scammed?
If you have problems with the contractor handling your home improvement project, here are steps to take:
• First, try to resolve the issue with the contractor, as many will be open to negotiation, especially if they believe you may take legal action.
• Follow up on any phone conversations with a letter, sent by certified mail, and request a return receipt so you have proof it was received.
• If attempts to reach an agreement fail, consider getting outside help from your state attorney general, local consumer protection office, or Call for Action, a national network of consumer hotlines. Here are some links to find where to file a complaint:
o U.S. Federal Trade Commission: www.ftc.gov or 877.FTC.HELP
o Better Business Bureau: www.bbb.org
o Call for Action: www.callforaction.org
o Locate your state attorney general: www.naag.org
o Locate your state consumer protection agency: www.usa.gov/state-consumer
o Financial Fraud Enforcement Hotline: www.stopfraud.gov/report.html
Take Charge of Your Home Improvement Project Before You Hire a Contractor
Lack of knowledge is the main reason people are taken advantage of by scam artists, so become an informed consumer and be prepared before you hire anyone.
• Get referrals from friends, family and neighbors who have had good experiences with their contractors.
• Check reviews from the Better Business Bureau or other reputable online sources.
• Verify that contractors are licensed and bonded for damage/theft protection and have liability/worker’s compensation insurance.
• If your state requires residential contractor licensing, check to see if complaints have been filed against the contractor you are considering.
• Check to see if you need a city or county permit for the work.
• Get written estimates from several contractors.
• Don’t assume the lowest bidder is the best choice.
• Ask about differences in price for the same type of work.
Insist on a Written Contract
• Even if your state doesn’t require a contract, insist on getting one.
• Read through the contract carefully. If you have any concerns, check with an attorney before signing.
Be Smart About Paying for the Work
• Pay by check or credit card—never cash.
• If needed, arrange for your own financing, through a financial institution you trust.
• Limit your down payment. Some state laws limit the down payment amount that can be requested, so check the requirements in your area.
• Stagger payments based on completion of work, to ensure that if the work is delayed or not completed, your payments will be, too.
• Know when you can withhold payment. If you have a problem with the service or products charged to your credit card and you’ve made a good faith effort to resolve the issue, you have the right to contact your credit card company and ask that payment (plus finance or related charges) be withheld on any pending purchases.
Take Charge of Your Home Improvement Project After You Hire a Contractor
Although you believe you’ve chosen a reputable contractor, there’s still work to do to protect your interests as the work is being conducted.
• Keep track of all paperwork (contract, correspondence, payment records, photos of work in progress, discussion notes). These records serve as vital evidence if problems arise.
• Use a sign-off checklist. Before you make the final payment, verify that:
o The work meets contract requirements and you have inspected and approved the work.
o You have written warranties for materials/workmanship.
o You have proof subcontractors have been paid.
o The job site is clean and free of materials and tools.