When chosing a contractor to work on your home, it is important to watch for scammers. Be sure to get everything in writing and sign a contract. Here is a great summary of what to look for in a contractor from Gregg Abbott, Texas Attorney General.
Home Remodeling and Repair
For most consumers, the home they own and live in is their largest and most important investment. Adding improvements, repairing damage, and keeping up with routine maintenance are all part of the smart consumer’s effort to protect and increase the value of this important asset.
Scammers know you’ll spend money to improve your home. Be sure you know how to protect yourself, and you should familiarize yourself with common home improvement scams.
Be cautious when a salesperson appears at your door uninvited. Two very common sales pitches often associated with home improvement scams are:
- The salesperson “was in your neighborhood and noticed that you needed” siding, storm windows, or some other improvement.
- The salesperson “just did some work in your neighborhood and has extra” building supplies that would be just enough to repave your driveway or reshingle your roof.
Both come-ons are red flags. Businesses that do a particular kind of home repair do not generally cruise neighborhoods, knocking on doors, looking for houses that need them. This would not be a very efficient way to find business.
And while most contractors will put up a sign in the yard where they are working to try and win some neighborhood business, they are not likely to go from door to door selling leftover materials. They are more likely to use the leftovers on the next real job.
Maybe not all door-to-door contractors are scammers — but many scammers do work from door to door. Home improvement scams often flourish in the wake of disasters, especially violent storms such as hurricanes and tornados. Some legitimate repair specialists may work door to door in these circumstances, but so do con artists.
You need to know who the person is and how you would be able to find that person. Is it a legitimate businessperson with dependable contact information and a good reputation? Or a fly-by-night who will disappear with your money?
Too often, the unsolicited salesperson uses high pressure sales tactics: “The offer is for today only!” “Special price only if you do it today!” If you are being hurried into a decision, your answer should be NO. You need time to check them out, and if they are legitimate business people, they will welcome your questions.
Choosing a Contractor
Take time to choose the person who will work on your home. It is a good idea to choose a contractor with an established physical address. It is common for people in construction to use cell phones, but you should be sure you can find anyone who has done work on your house, in case problems arise.
The best policy is to get bids from more than one person for any work you are going to have done on your house. Get the bids in writing, and look for detail about exactly what will be done. Depending on the nature of the work, you may wish to specify the kinds (grade or thickness) of materials that will be used.
Beware of the “low-ball” bidder whose price is much lower than everyone else’s. Question the quality of the materials that will be used and the work that will be done. A very low bidder may not plan to include all the specific tasks you might expect, may use very cheap, inexperienced labor, or second-rate materials. Most of the legitimate bids will fall into a fairly close range.
Seek references. Ask to speak to satisfied customers, and ask them if you can visit their homes to inspect the work done by a contractor you are seriously considering. If you are hiring the kind of worker who must be licensed by the state (such as an electrician), contact the licensing agency to check the person’s credentials and inquire about complaints.
The Texas Department of Licensing and Regulation (TDLR) is a state regulatory agency that currently oversees over twenty types of businesses, industries, trades and occupations. The agency is responsible for issuing licenses, conducting inspections, investigating complaints, assessing penalties, setting rules and standards and holding hearings.
Verify any claims the contractor makes about energy savings or increased security, home value, or other added advantages to the improvements you are buying.
Be Smart about Contracts
Most home repair and remodeling work is performed under contract. Legitimate businesses will usually insist on having a contract for their own protection, and a well written contract should protect the homeowner, too.
DO NOT sign a contract with blanks in it. It happens: the blanks get filled in later, and the new terms are not likely to be in the consumer’s favor.
DO NOT sign a contract until you have carefully read and understood every word of it. Sometimes it can be difficult to get out of a signed contract.
These precautions are important to remember whenever you sign a contract of any kind. Consumers contact our agency all the time complaining of unreasonable, even outrageous, terms of business. Too often, they have signed a contract they have not read which puts them at a disadvantage.
Do not allow anyone to rush you into signing a contract. The sales person should be willing to leave the contract with you so you can read it carefully on your own time. If anyone rushes you or tries to make you sign on the spot, or will not leave a copy for you to study, you should be suspicious of that person and the contract.
Make sure everything promised to you is in the written contract. Insist on a written contract that specifically states what the contractor will do, when the work will start, and when it will be completed. Make sure the contract includes everything the salesperson or contractor promised and spells out the cost of special orders and materials.
Be aware that most contractors will not allow you to change your mind for free about what you want done or how you want it done. Often a contractor will require a service charge for changing the work order, and this should be covered in the contract.
Get and keep copies of everything you sign at the time you sign it.
What the Law Says
Any contract you sign for work on your homestead must contain the following warning next to the space for your signature:
“Important Notice: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. Know your rights and duties under the law.”
When you sign a contract for home improvements on your homestead, the contractor can legally place a lien on the homestead. If you sign a contract containing the language quoted above and you fail to make the payments, the company can take away your home. Therefore, it is extremely important that you understand exactly what your obligations will be under the contract, and that you are confident you can meet those obligations. If you have any questions or doubts, consult an attorney before you sign the contract.
If there will be a lien on your home, make sure a notary is present to witness your signature. A notary other than the salesperson must be present to witness you sign the document creating the lien. It should be a warning to you if the salesperson does not have a notary present or if he says he will take care of the notarization later.
It bears repeating: get and keep copies of everything you sign.
If your contractor fails to pay the subcontractors and suppliers, YOU are responsible, even though you have not contracted directly with the subcontractor or supplier. Under Texas law, if a subcontractor or supplier who furnishes labor or materials for the construction of improvements on a property is not paid, the property may be subject to a lien for the unpaid amount.
If your homestead improvement exceeds $5,000 in cost, the contractor is required by law to deposit your payments in a construction account at a financial institution. Ask the contractor for written verification of the existence of the construction account. Monitor deposits and disbursements to subcontractors, laborers, and vendors. Access to the account record should be included as a requirement in your written construction contract.
Paying for the Work
It is normal for a contractor to ask for partial payment in advance, and provided that you have taken the precautions recommended above, you should expect to provide a part of the cost before the work begins. However, it is notorious that scammers involved in door-to-door rip-offs will ask for payment in full in advance, and then abscond without completing (sometimes without even starting) the job.
Even with a reputable business and a sound written contract in place, you should not pay in full until the work is complete and you have inspected it yourself and found it satisfactory. A partial payment schedule will usually specify what part of the job has been done when a partial payment is due. Inspect the work and make sure the contractor has met the schedule before you make your payment.
If you are asked to sign a certificate of completion, do not do so until all the work is completely finished, the site is cleaned up, and you are satisfied.
If the job is expensive enough that you will need to finance it, be sure to shop around for the best terms on the financing. This is separate from taking bids on the cost of the work. In choosing your source of financing, you will be concerned with the rate of interest, finance charges and the terms of the pay-out. As with any financing agreement, you should calculate the entire cost of interest and charges over the term of the loan.
A home improvement company may offer financing, but this is not necessarily the best option, even though it may seem easy to arrange the financing and the work contract at the same time. Be aware that some contractors will have you sign a credit contract to pay a certain price for the work plus a finance charge, then immediately sell the right to collect on the contract for 20-50% less than the contract price. That usually means you could have gotten the work done for 20-50% less by paying cash or arranging financing yourself.
If you are asked to sign a credit check application, read the form carefully and make sure it does not bind you to anything. Make sure it really is a credit check and not a contract. If you do not understand everything in the document, do not sign it until you have had someone else explain it to you.