How can you tell if a contractor might not be reputable? You may not want to do business with someone who:
- knocks on your door for business or offers you discounts for finding other customers
- just happens to have materials left over from a previous job
- pressures you for an immediate decision
- only accepts cash, asks you to pay everything up-front, or suggests you borrow money from a lender the contractor knows
- asks you to get the required building permits
- tells you your job will be a “demonstration” or offers a lifetime warranty or long-term guarantee
- doesn’t list a business number in the local telephone directory
The Home Improvement Loan Scam
Here’s how it works: a contractor calls or comes to your door and offers a deal to install a new roof or remodel your kitchen. He says he can arrange financing through a lender he knows. After he starts, he asks you to sign papers; they may be blank — or he might hustle you along and not give you time to read through them. And later you find out, as a result, you’ve agreed to a home equity loan with a high interest rate, points, and fees. The work on your home isn’t done right or isn’t completed. And the contractor — who may already have been paid by the lender — has lost interest.
To avoid a loan scam, don’t:
- agree to a home equity loan if you don’t have the money to make the payments
- sign a document you haven’t read or that has blank spaces to be filled in after you sign
- let anyone pressure you into signing any document
- deed your property to anyone. Consult an attorney, a knowledgeable family member, or someone else you trust if you’re asked to.
- agree to financing through your contractor without shopping around and comparing loan terms
If you have a problem with a home improvement project, first try to resolve it with the contractor. Many disputes can be resolved at this level. Follow any phone conversations with a letter you send by certified mail. Request a return receipt. That’s your proof that the company received your letter. Keep a copy for your files.
If that fails, consider getting outside help like:
- contact your state attorney general or local consumer protection office
- seek out your local home builders association
- finding your local media’s call for action lines
- dispute resolution programs