3 Common Contractor Scams and How to Avoid Them

Americans spend over $300 billion on home improvements and repairs each year. Unfortunately, some of those dollars are lost to contractor scams. Look out for these 3 scams to safeguard your investment.

Scam One

Deposit and Dash

In California, contractors cannot ask for more than $1,000 or 10 percent of the project cost up front, whichever is less.

Red Flag

Contractor demands a large cash deposit for the project upfront.

The Risk

Contractor takes your deposit and never returns.

Precautions:

Sign a comprehensive contract.

Don't pay in cash.

Don't pay more than 50 percent up front.

Scam Two

Bait and Switch

Contract Essentials:

Start and completion dates
Conditions regarding project delays
Itemized materials list
Warranty information
Procedure for project changes

Red Flag

Contractor offers a shockingly low bid and a loosely worded contract.

The Risk

Contractor is bidding low to win your business and will add expenses later in the absence of a written "change procedure."

Precautions:

Get multiple bids on your project.

Sign a comprehensive contract.

Don't pay in cash.

Scam Three

Storm Chaser

In Colorado, roofing work valued over $1,000 must involve a written and signed contract. If it is cancelled, the contractor must refund payments for unfulfilled work.