9 Signs Your Contractor is Trying to Scam You

In a ranking of the most frequently cited consumer complaints, home improvement and construction grievances topped the charts — second only to the auto industry — in the 2020 Consumer Federation of America (CFA) report, which surveyed 34 state and local consumer agencies collectively handling over 280,000 complaints that year.

Most consumers who filed complaints about their contractor cited poor-quality work, jobs that were never completed, and failure to secure required permits.

If you’ve been dreaming up a home improvement project but are hesitant to hire a contractor, read our list of nine warning signs and possible scams so that you can navigate the hiring process with confidence.

A contractor who balks when you ask to see their license or professional certification and insurance is a big red flag. Depending on state and local regulations, as well as the scope of your project, your contractor may or may not be legally required to have a contractor's license, but they should definitely have insurance.

That said, the majority of states require licenses to ensure contractors are holding themselves to the latest professional standards. Also double check your contractor’s license number — not just their registration — with the state agency that oversees licensing to make sure it’s not a fraudulent number.

If you happen to live in a state without contractor licensing requirements, find your state’s National Association of Home Builders (NAHB) chapter. Some chapters have created professional training and certification programs because their states do not have contractor licensing requirements.

Professionals understand that you’re most likely “contractor shopping” and getting estimates from several companies. A contractor who wants you to pay a deposit immediately, or says they’re running a special for a limited time, is a major warning sign of a scam, according to the Federal Trade Commission (FTC).

When you’re interviewing contractors and gathering bids, you may also get pressured to sign an estimate just to seal the deal. Never sign an estimate, bid, or an “authorization” because you might be unknowingly signing a binding contract.

A home improvement professional who only wants to give you a verbal estimate or says “they don’t usually do contracts” is not following industry standards, and they may even be setting you up for a scam.

Having a contract is a widely accepted practice, according to the NAHB. It outlines the scope of the job, how it will be carried out, the completion date, and the agreed-on pricing structure. A contract also protects you in case something goes wrong.

Similarly, a sloppy contract is not a good sign. Did you discuss parameters of the job that are now missing from the contract? That could be a red flag. Finally, never sign anything you haven’t read thoroughly, and don’t sign a contract with blank spaces.

The FTC advises consumers to get contractor references from trusted sources. While interviewing contractors, you can also ask them to provide the names and contact information of previous clients, and you should be able to actually get in touch with these references.

Professional contractors are used to providing this information, and most customers — both satisfied and unsatisfied — are happy to give their reviews. Other sources for reviews could be the Better Business Bureau or local chapter of the NAHB. You might even try Googling the contractor’s name with the words “scam” or “review.”

Most reputable, experienced contractors are busy — too busy to drive around looking for homes that need repairs and potential customers. If someone knocks on your door and says they noticed your porch, driveway, etc. needed some work, they are most likely either very inexperienced or a scam artist.

In the wake of a hurricane or tornado, towns are often swarmed with roofing companies, and, unfortunately, some of them do scam homeowners. Although a roofer’s post-storm solicitation could be a legitimate attempt to make a decent living, they could also fail to complete the job, or do just shoddy work.

Some even secure hefty deposits from homeowners and then promptly leave town. The main thing to watch out for here is a particularly pushy salesperson who tries to scare you about the condition of your roof or home.

A warning sign of a potentially shady contractor is someone who tries to sell you leftover materials from their last job. Although seemingly helpful, this could mean that they either didn’t finish their last job or billed their previous client for materials they didn’t need.

Some contractors include materials in their flat fee, while others bill for them at the end of a job, but whatever structure you decide on, it should be clearly outlined in your contract. And a reputable contractor will always use new materials specific to your job.

Asking for full payment before actually starting the job is a red flag, according to the NAHB, because “shady contractors demand cash and then run with the money.”

While a deposit for materials might be warranted, some states have legal limits on how much you can pay upfront. In the state of California, “the legal limit for a down payment is 10% of the contract price or $1,000, whichever is lower,” according to the Department of Consumer Affairs. Furthermore, you should only pay a deposit after signing a contract, you should never pay cash, and checks should always be made out to a company rather than an individual.

Another warning sign is a contractor who significantly underbids other contractors. Although perhaps not an outright scam, it could signal that they’re either inexperienced or that their work is not up to professional standards.

Saving some money might be tempting, but cutting corners can lead to issues that might cost you more in the long run. To finance your home improvement project, take a look at some of the best mortgage lenders who offer home equity lines of credit, home equity loans, and mortgage refinancing.

Professional contractors are the ones responsible for securing work permits, not the homeowners. If a contractor asks you to secure your own permit — legally required in most states and municipalities, depending on the scope of the work — this is a sure sign that they are not a legitimate contractor, according to the NAHB.

The pandemic and working from home gave us all a lot of time to contemplate our dream homes. Twenty-five percent of Americans said they’re working on home improvement projects now because they “finally have time for it,” according to Statista.

And although grievances against contractors for unprofessional practices and scams continue to rank high, that doesn’t mean that all contractors are bad. There are a lot of professional contractors out there. Use these tips, ask your friends and family members for recommendations, and check with your state chapter of the NAHB as well as the Better Business Bureau.

Ready to jump on that home improvement project? Check out this guide on how to get a loan so that you can learn how to fund your dream home and review our round-up of the best home improvement loans to find the right one for you. To get the best rate on a loan, consider making moves to boost your credit before you apply.