In 2012 Hurricane Sandy roared up the East Coast, damaging homes along with businesses and infrastructure. When the storm passed and the sun finally came out, scammers pounced. Contractorsclaiming to be everything from roofers to carpenters upended recovery efforts, costing New Jersey $20 million in fake claims alone.1
Unfortunately, damage from both major and minor storms creates environments for scammers, but it doesn't have to be this way - and you can take steps to protect yourself. Look for Warning Signs of Fraud
Fraud often begins with a phone call or a causal knock on the door from a person claiming to be a contractor. If you ever get one of those calls or knocks on the door, beware. Chances are the contractor is not who they claim to be.
Here are some warning signs that you should be on the lookout for:
- A contractor that demands money up front in the form of a cash deposit.
- A contractor that does not have a local address (steer clear of contractors with P.O. boxes or hotel addresses).
- A contractor who pulls into your driveway with out-of-state license plates.
- A contractor that arrives on your property in a vehicle that does not include their name or their company’s name.
- A contractor that is on a law-enforcement list, such as a sex-offender registry.
Of course, just because a contractor is from out-of-state doesn’t make him or her a fraud. Many home contracting companies have offices across the country. But before you agree to anything follow the simple steps below to make sure they are trustworthy. In addition, if you decide to hire an out-of-state contractor, make sure they have an agreement with a local office so that they can make warranty repairs when the job is finished. 1. Check With Your Insurance Company
When your home is damaged, contact your insurance company to make sure the work is covered under your homeowner's policy. Your insurance company may send an adjuster to look at the damage and decide what repairs need to be made, and at what cost. If you have already gotten a bid or a contract, let your adjuster look at it. Keep in mind the insurance company will pay only what the adjuster approves.2. Get Estimates in Writing
If you meet with a contractor prior to getting an estimate from an insurance field adjuster, do not sign a contract unless you have a written estimate. It should be on the company's letterhead and have clear contact information. And, get more than one bid from more than one company. Three bids is a good benchmark. These additional estimates will help you decide on the best price, but could also help you decipher which offers are real and which could be scams.
Each bid should list all the repairs and prices for what each of them will cost. Bids should also clearly state labor and material costs.
Getting an estimate should be a free service. If a contractor asks you to pay for his bid, tell him no thanks and call another company.
3. Don't Pay Up Front
Never pay for the entire project up front. That's the golden rule of dealing with contractors. However, some contractors might want a portion of the money to get the work started. This should only be a small deposit - make your final payment only after the job is completed. If you can, pay with a credit card because they come with fraud protection. Never pay in cash.4. Check Their Licenses and Insurance
Contractors are required in many states to have state or local licenses, ask to see these documents. A license should have a number attached to it, write it down and then call the appropriate licensing authority to make sure the contractor is legitimate.
Professional contractors should also carry liability insurance and compensation insurance (if they have employees), although in many areas sole proprietors are not required to have coverage. If that's the case, be wary. If there is an accident, or if the work goes badly, you might have to foot the bill. As a rule, your homeowner's insurance will not cover any cost because of injury or damage if the contractor is not insured. To be safe, obtain proof of insurance before work begins.
Check the Better Business Bureau
to see if there are any complaints against the individual or company you're considering hiring.
5. Get a Signed Contract
Once you have selected your contractor, ask for an actual contract and read and understand it before you sign. The contract needs to be filled out correctly and there should be no empty spaces, as a fraudulent contractor could fill those spaces in later. If you don't understand the language, or if the contract is open-ended or ambiguous, don't sign. Tell the contractor that you need a couple of hours or a day to review the document. If they start sweating, or if they balk at that idea, find someone else to work with.
6. The Sign Off
Once your contractor finishes the job, inspect his work. If it does not match what is in your contract, ask that the problem areas be fixed. A legitimate contractor will make a "punch list" of everything that needs to be done before he considers a job complete.
If you think you're already working with a contractor that might be fraudulent, or isn't holding up his end of the bargain, there are places you can go for help. Every state has an insurance fraud office
. Check yours to see if you can file a complaint online. You can also contact the Better Business Bureau, your state's insurance commissioner, your state's consumer protection office
, or the police.
Rebuilding your property after a disaster can certainly be stressful, but you can make hiring the right contractor a little less challenging if you do your homework and research up front, and keep in mind a few key red flags.