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How To Skirt Contractors' Scams

This week, in partnership with CBS Evening News, The Early Show is doing a five-part series called, "Taking Advantage," to help you avoid the scams that have made victims of many others. In Part One, the focus is on home repair scams.

Even the fastest-talking contractor sends out signals that all may not be on the up and up, says Danny Lipford, The Early Show contributor and host of "Today's Homeowner."

Lipford offers a list of warning signs that can indicate you may be dealing with the wrong building contractor. Lipford is a licensed contractor and a certified graduate remodeler.

"It is amazing the number of people that you hear about people being scammed by contractors," says Lipford. "Although many people think of little old ladies as targets for this type of scam, more and more people are losing money and not getting their home improvement jobs complete because of these unscrupulous so-called contractors.

"As a contractor with 25 years of experience and speaking on the behalf of professional contractors, I know that I want people to be aware of the warning signs that they may be dealing with the wrong contractor."

Lipford says you should be wary if your contractor:

Uses Very Low Pricing or Pressure Tactics

A price that sounds too good to be true is probably, in fact, not true. This also pertains to a contractor who pressures you into signing a contract. If he is a reputable contractor, he won't need your business that desperately. Lipford notes it's important that all contractors who are bidding on a job receive the same description of the type of work the homeowner has in mind. Their estimates for the work should then be close.

Has A Business Background You Are Unable to Verify

If you cannot verify a contractor's license, address, references, insurance and/or membership in a trade organization such as NAHB (National Association of Home Builders), then beware. You can call the local building inspection department to find out what contracting licenses and permits are required in your areas.Then you need to check to make sure the contractors you are dealing with have them.

Requires Cash Payments or High Down Payment

Never pay more than 20 percent down and never make cash payments. Some states require that the down payment not exceed 10 percent.

Uses An Insufficient Contract

Any contract should detail materials to be used, a payment schedule, complete scope of work and give you a three-day "Right of Recision."
And a contract between the homeowner and the contractor doesn't have to be a big, long legal document. Lipford says that it should describe what needs to be done and clarify what will not be done. For example, in the case of a painting job, clarify what will not be painted. This will reduce the chances of the contractor telling you the price of completing the job has increased in the middle of the project

Asks You To Buy Permits

Proper permits are the responsibility of the contractor, not the homeowner.

Moves Into An Area After A Disaster

People who live in an area that has been hit by a hurricane or some other natural disaster should be particularly cautious. Lipford says that unscrupulous floating contractors gravitate toward these areas where much work needs to be done and they aren't known.

Not every contractor is out to get you, Lipford says. The majority are honest, reputable business owners who strive to do quality work, using good materials at a reasonable cost. In fact, many of these contractors are members of associations such as the NAHB (National Association of Home Builders).

For a look at how some unscrupulous home repair contractors operate, click here.