7 Signs Your Contractor is a Fraud

Having been a contractor for more than a decade I can tell you some dead giveaways that have helped me avoid hiring a fraud contractor. We general contractors are constantly hiring subcontractors so our experience on what to avoid can help you do the same when hiring out work on your house. To avoid becoming a victim of a remodeling scam, it’s important to know what to look for and how to protect yourself.

Nobody can know for sure, but there are some tell tale signs that should raise red flags during the initial conversations with your potential contractors. Consider those initial meetings just like the dating process so you can avoid a level 4 clinger or a gold digger who is going to run off to the islands with your cash.

Here are 7 signs your contractor is a fraud. Be on the lookout for them.

Sign #1 No License or Insurance

First and foremost, make sure that the contractor is licensed and insured. A legitimate contractor will have a current license, liability insurance that covers any accidents, and worker’s compensation insurance to cover his workers who may get injured on the job. Be sure to check the contractor’s credentials with your state’s licensing board and ask for proof of insurance.

It’s almost a joke how many contractors have “licensed & insured” written all over their business cards and website, but how many of them actually have that license and insurance? You, as the consumer, need to check and demand proof. Taking their word on this is not good enough.

Sign #2 No Address

Look for a contractor with a permanent physical address, business phone number and website. A contractor who only provides a cell phone number or P.O. Box address is a big red flag to me. Where is your shop or office? Where is your website? These are all completely valid questions.

Sign #3 Length of Business

This isn’t a deal breaker because everyone has to start somewhere, right? That being said, signing a contractor with a contractor that was only incorporated a month ago is a potential red flag. The longer they have been in the business the more confident you can be that they are the real deal. It’s a risk to hire a brand new company, but you can sometimes get a deal that way, just be wary.

Sign #4 No References

Ask for references. And check them! A reputable contractor will have no problem providing you with the names and contact information of past clients. Give the clients a call. If they can’t or won’t provide references I would run the other way. Really? They can’t provide a single person who can vouch for their work?

When talking to those references, examine their work in person if you can because pictures can cover over all kinds of issues. All those HGTV projects look beautiful on TV, but you don’t see the little flaws unless you are up close and personal checking out their work.

Sign #5 Big Upfront Payments

Another thing to look out for is a contractor who asks for a large down payment before any work is done. Depending on what kind of work you are looking to hire out, a reputable contractor will typically ask for a small deposit to cover the cost of materials and pre-construction costs, and then will ask for regular payments as work progresses.

As a contractor myself I want to say that we contractors are not the bank. You want the work done and we are doing it so don’t be surprised if a contractor asks you to pay for certain portions upfront since some suppliers give us terms, but others require us to pay upfront and we need your money to buy that tub or tile or door you want installed.

Sign #6 No Formal Contract

When signing a contract, be sure to read it carefully and pay attention to the details. A contract should include a detailed description of the work to be done, the materials to be used, the start and completion dates, and the total cost. If a contractor is unwilling to provide a written contract or the contract seems vague or incomplete…run.

Don’t let anyone do any work on your house for payment without a written contract. The contract should also outline the payment terms so both parties agree to things ahead of time. No “gentleman’s handshakes” allowed.

Sign #7 Not Pulling Permits

To be fair permits are a pain in the butt. They slow every project down, add costs and inconvenience like crazy, but if your contractor is not willing to pull permits then what other laws are they skirting? Are they even licensed properly to pull permits?

Permits and inspections are required so that you as the homeowner can be sure that the work is being done according to code. Do you know how your wiring should be installed to avoid fires, or how your framing needs to be installed to avoid a collapsing building or are you taking your contractor’s word for it? The inspector (as much as they drive me nuts and make my life difficult) is an unbiased 3rd party to ensure everything is done properly and you are safe.

Of these 7 signs some are deal breakers and others are just a red flag that may turn out to be nothing. For those red flag ones just proceed with caution. Trust but verify. When you do find a contractor that is the real deal be sure to thank them and share them with all your friends. That will help the good guys thrive and the bad apples rot away quietly making the crop of contractors better every day.