Everyone can be scammed. Even if you think you’re pretty savvy about things, you can be scammed—maybe especially because you think you’re pretty savvy about things. Between our desire to have goods and services and our determination to get a good deal on those goods and services, we can all be vulnerable to a good scam.
Owning a house, as you may have noticed, is expensive, and thus homeowners can be extra vulnerable to scammers. And hiring contractors can be a fraught, stressful process. You might think that would make it harder to fall for contractor scams, since we usually enter into these relationships with our bullshit antennae already up, but people fall for contractor scams all the time—about 10% of Americans have been hit by a contractor scam, losing an average of $2,426 in the process. While you might think scammers are obvious and easy to avoid, that’s probably only because you haven’t been scammed yet.
Driveway destruction
The scam: You hire someone to repave your driveway—maybe they showed up at your door offering a great quote, or maybe you found them through internet research. Either way, they get to work and tear up your existing driveway. Then, once your driveway resembles the surface of the Moon, they announce the cost will be twice as much as the original quote—or more. If they’re being polite they’ll offer some excuse as to why the price increased, but either way, you’re in the same spot: You either pay up or you have no driveway.
Why it’s easy to fall for: It’s just so ... brazen. Holding your house for ransom is often totally unexpected, but they know that once your driveway is ruined your only alternative is to hire a second contractor for even more money.
More materials, more problems
The scam: A contractor shows up at your door and tells you they’re working in your area, and they have materials left over. To get rid of them and make their time in your neighborhood more profitable, they’d be happy to do some work at your house for a big discount (since they already have the necessary materials). They negotiate a perfectly reasonable deposit and disappear—or spend a day doing some really low-quality work and leave you with a mess.
Why it’s easy to fall for: Like all great scams, it combines a perfectly reasonable scenario with your own desire to save a buck. Plus, having a friendly person at your door puts you at ease because you feel like you’ve made a connection.
The "urgent" deal
The scam: A contractor offers you a terrific deal on a project, but only if you sign a contract and put down a deposit immediately. Once you do, they walk away and never return.
Why it’s easy to fall for: Time pressure is a common psychological trick used by scammers. And it’s common because it works—it triggers a primitive reaction in our brain that drives us to make decisions we normally wouldn’t make. This is one reason why people often have a sense of disbelief that they fell for a scam like this—once the time pressure is removed, we think rationally again.
Straight-up insurance fraud
The scam: You tell a contractor you can’t afford a project, but they have a helpful idea: insurance. They tell you that they will get your insurer to cover the project; just let them handle it. One of two things happens next: Your contractor literally commits insurance fraud in your name by inventing a covered event, or they file a claim and take payment from the insurance company—but never actually do the work.
Why it’s easy to fall for: Contractor scammers always approach as friends who are just trying to help us out, and it’s not uncommon for legitimate contractors to deal with insurance companies on behalf of homeowners. It’s always a good idea to be in on any communications between your contractor and your insurer and to double-check any claims a contractor makes about what’s covered.
My friend the lender
The scam: We’ve all had that moment when a contractor gives us a quote and our souls briefly leave our body in shock—but this contractor has a solution. They have a lender they work with frequently who will offer a great rate to finance the project, and the contractor will offer a discount if you use them. The contract you sign with the “lender” actually takes out a home equity loan on the house—and the contractor vanishes.
Why it’s easy to fall for: Financing home repair and improvement projects is pretty common—but everyone dreads the trouble and paperwork. When a contractor makes it easy for us, we’re grateful, and might not do the due diligence we should.
Free inspection!
The scam: A contractor knocks on your door and offers to inspect some aspect of your home for free. They might claim they can see from the street that your roof, windows, air conditioning, or other part of the home is old and showing some wear and tear. The contractor then magically finds an emergency situation—and may even damage your home purposefully to force you to hire them to do the work. Once you pay a deposit, they go to “get materials” and never come back.
Why it’s easy to fall for: You figure if the inspection is free, there’s no risk—and you’re getting over on them because you’ll get the information and then you can go looking for the best deal to fix it. You’re not expecting the sudden pressure of having to make a decision right there because they’ve discovered a very bad, no good situation that threatens your home or family—and you’re certainly not expecting a roofer, for example, to come down from your roof holding a bunch of shingles they literally tore off on purpose.
How to protect yourself from contractor scams
Because we’re all human and our brains are hackable, anyone can fall for a scam—but you can take steps that will protect you from most contractor scams:
Always do research. Never hire a contractor without researching them first. No matter how good an impression they make while standing in your doorway or when working up a quote, do your due diligence every time. Ask them for the license and insurance information and then use your state’s license verification website to make sure they’re legit.
You should also ask for and check their references to make sure they’ve completed projects and have satisfied clients. If they can’t provide these or you can’t actually get in touch with them, think twice.
Never sign right away. If you’re being pressured to sign a contract and/or drop a deposit to get a deal or secure an appointment for the work, walk away. Even if it’s not a scam, it’s a contractor you probably don’t want to work with.
Watch the deposit. Many contractors want a deposit before scheduling or beginning a job, and typically an amount between 10% and 33% isn’t crazy, depending on the total cost of the project. But more than that should give you pause, because you want to have some leverage if things go south. And some states limit how much a contractor can ask for, so check your local regulations before agreeing to anything.
Never pay cash. If a contractor insists on a cash deposit, politely show them the door. A credit card offers you a lot more fraud protection, although some contractors won’t accept them because of the associated fees. But even a check is a better option than cash, as it at least establishes a paper trail.
Always get your own financing. Just as shopping around for car loans is always a good idea, you can almost always get a better financing deal for home repair or improvement projects on your own. And by not using a contractor’s “recommended” financing you remove any risk of getting suckered.
Trust your gut. Legit contractors will outline the project, give you clear costs, and then give you time to consider and ask questions. If you feel pressured, confused, or frightened when speaking with a contractor walk away, even if it seems like they’re making sense.
If you got scammed by a contractor
So what happens if a fast-talking scammer caught you at a bad moment and scammed some cash out of you for a repair or project they’re obviously never going to do? There are a few basic steps to take:
Contact law enforcement. File a report with your local police. Even if they never identify and catch the scammer, having a record of the scam may be useful for you if you need to make an insurance claim. You should also contact your state’s Attorney General’s office and file a report.
Consult a lawyer. It’s possible you can pursue legal action against the scammer if you can locate them and prove they scammed you. Speaking with a lawyer can give you some idea of your chances and outline a way forward.
Contact your insurer. Your homeowners insurance may cover at least some of the financial loss, and if the scammer damaged your home as part of their scheme, you may have coverage for that as well. A conversation with your local insurance agent is a must.
Consult a (legit) contractor. Just because you got scammed doesn’t mean your home doesn’t need work, and sometimes scammers damage homes accidentally or purposefully while doing their “work” (or they do some of the work, and not particularly well). Don’t assume your financial loss is the end of the trouble—get a real contractor in there to ascertain if you actually do need work done.