Natural Disaster

“Homeowners who found themselves in the sights of Hurricane Irene may soon be targeted by scammers looking to profit from their pain.

As attention turns to repair and rebuilding, residents in affected areas should be aware that disasters often attract unscrupulous contractors who will prey on those trying to put their lives back together.

The National Consumer Law Center reported in late 2008 that complaints about contractor fraud to the Louisiana Attorney General’s office leaped to 6,000 in the two years after Hurricane Katrina, from about 150 a year prior to the storm. The counterpart in Mississippi received more than 800 reports of fraud.

One common scheme is for scam artists to ask for an up-front payment and never show up to do the work. A survey by Louisiana State University found that was the case for 61 percent of respondents who had been victims of contractor fraud in the three years after Katrina.

Another big concern is contractors who use poor-quality materials and cut corners, pocketing the price difference from what it would cost to make proper repairs.

And the scams don’t come cheap: 15 percent of respondents to the LSU survey said they lost between $10,000 and $30,000.

The most common problems come when homeowners hire unlicensed contractors who hang signs advertising low-cost work or head to an affected area after a disaster.

“We call them storm chasers,” said Cheryl Reed, director of communications for the consumer website Angie’s List. “Those are people trying to make a buck off of somebody else’s misfortune.”

One common tactic is for contractors to go door-to-door and offer to help. “It’s easy when people are upset and they want to get this started,” said Loretta Worters, vice president of the Insurance Information Institute. “You’re so distraught that you don’t really think about the implications.”

Although homeowners may feel pressured to find someone to make the essential repairs, a sense of urgency can make them more vulnerable. Slowing down and taking the time to check a contractor’s credentials and references can save time and money in the long run.

Here are some tips to help ensure you hire a contractor who will do the job properly:

1. Be suspicious of any contractor who tries to rush you to make a decision, especially on non-emergency or temporary repairs.

2. Send away quickly any contractor who claims to be backed by the government. The Federal Emergency Management Agency does not endorse individual contractors or loan companies.

3. Ask to see the primary contractor’s driver’s license and write down the number and the license plate number of his or her vehicle. Also ask to see the contractor’s proof of liability and worker compensation insurance. Make sure anyone you hire is licensed and bonded, or you could be at additional risk for liability, should the contractor have an accident on the job.

4. Never let a contractor discourage you from contacting your insurance company.

5. Beware of contractors who encourage you to spend a large sum on temporary repairs. Payments for such repairs are covered as part of the total insurance settlement. If you run up a big expense for temporary fixes, you may not have enough money for the necessary permanent repairs. Discuss what’s needed with your insurance agent or claims adjuster. And remember to keep receipts.

6. Ask friends and neighbors for recommendations or get a list of reputable contractors from your insurance agent or company representative. Check out candidates on online forums, and with the Better Business Bureau, your local home builders association, consumer affairs department and your state attorney general’s office before signing a contract. Never give anyone a deposit until after you have researched their background.

7. Don’t pay for work up front. Most contractors will require a down payment, but that should just be a portion of the total bill. And don’t pay anything until you have a written contract. Never sign a contract with blank spaces, which a crooked contractor can alter after you’ve signed the document.

8. Beware of price gouging. While prices often rise as demand increases, you should report exorbitant hikes to local authorities. Get all terms in writing; that includes prices for labor and materials, a precise description of the work to be done, time schedules, guarantees, payment schedules and estimated start and finish dates.

9. Don’t pay with cash and don’t sign over an insurance settlement check to the contractor. Using checks or credit cards creates a record of your payments, which will be helpful if there’s a dispute.

10. Never pay a contractor in full or sign a completion certificate until the work is finished and you are sure the work satisfies current building codes.

11. Report suspected fraud to local authorities. Also, report anyone who encourages you to fabricate an insurance claim to your insurance company, the local police, the state insurance department or the National Insurance Crime Bureau hotline at 1-800-TEL-NICB”

Why would that be, you might ask? It’s really quite simple and is based upon the law of supply and demand. When building activity is at its peak, both building materials and labor are at a premium; but when activity is low, contractors and suppliers cut prices in order to maintain the necessary volume to remain in business. We’re currently in one of those times.

While that doesn’t mean that every deal offered is a good one, homeowners who are willing to spend some time doing comparison shopping will find great deals and contractors eager to provide both great service and prices. Unfortunately though, there are always a few unscrupulous contractors, desperate for business who are willing to lie, cheat, or steal in order to fatten their wallets. We’ll give you a few tips to avoid the crooks.

Always ask for recent references (preferably a half-dozen or more) and then check them out—all of them. If you can view some of the most recent jobs, that’s even better. NEVER pay money up front before the job is started or material is delivered. Small contractors may tell you they have to have up-front money to begin the job, and if you agree, you risking losing all of it.

One way to get around this problem is to arrange to pay for the material yourself. In fact, you may be able to supply all of the material and have the contractor supply labor only. The negative side of this is large jobs where you may not have any idea of what the material will cost. (In the past I did a number of such jobs, including building entire houses, supplying labor only. However, I always provided my customers with a written estimate of all material costs and updated it as the job progressed.) If you’re comfortable with such an arrangement, it can offer significant savings. Then, if you are buying from a local home center, you may be able to get a discount if you use their credit card, or you can charge the total to an awards card. Either way, you will have additional savings from the transaction.

Demand lien waivers (available at office supply stores or online) to protect you from subcontractors or suppliers who don’t get paid. Lien waivers should be requested each time a payment is made to the contractor.

Additional Savings Opportunities:

Shop for materials at local “salvage stores.” While you may assume that such stores carry only junk or damaged materials, that’s not the case. I’ve often saved hundreds on returned or slightly damaged doors and windows that were equal to or better than those for which I had originally budgeted. The key is to make certain the items fit your needs, both for energy efficiency and appearance.

Do some of the work yourself. Those who are handy, and some who are not so handy, will still find some tasks on their project where they may be able to save by providing some of the labor. Jobs as simple as site clean up, painting, screwing down a subfloor, or installing insulation can easily be done by anyone who has ever operated a hand drill or paint roller. Check with your contractor to see if providing labor on your job makes sense.

Check online for appliances, light fixtures, ceiling fans, special doors and windows, and finish materials. While you may not choose to order online, you can at least do some comparison shopping; and you may find local dealers of which you were unaware.

Investigate all your materials options. For instance, if you are painting the trim work, there are options that are much less expensive than wood, many of which will provide a better finish with less effort. There are molded trims that look great and, once painted, can’t be distinguished from real wood. Some of these materials, however, do not do well in high moisture areas and especially don’t like getting wet. In such cases you’re better off with wood.

Use your computer to check for substitute and less expensive options for all your material needs. There are some great sources of information where you can compare materials, costs, and ease of installation.

Reprinted by permission from TheHousingGuru.com