Renovating your house? Investing in a fixer-upper? Upgrading one of your properties so you can increase the rent?
Whatever the case, you’re probably going to need to bring in a contractor to help you do the heavy lifting. But given such a lack of regulation in the industry, you want to be extra careful to make sure someone doesn’t take advantage of you.
Popular Contract Tricks and Scams
This article certainly isn’t intended to assert that all contractors are sleazy or unscrupulous. The majority are hardworking, honest, and straightforward professionals who are doing what they love and working to make a living for their family.
But you have to be cautious. There are bad seeds in every market, and they’ll use tricks and scams such as the following to take advantage of unwary customers:
- It’s normal for a contractor to ask for some money up front, but if they ask for a substantial portion of the total project cost, this is not a good sign. It suggests either a scam, or they may currently be on shaky financial ground.
- If a contractor ever tells you that he or she can offer you a steep discount because of not having to pay for a license or insurance, run away as fast as you can.
- While this one usually reveals itself too little and too late, dishonest contractors will sometimes play the extras game, wherein they throw a bunch of changes into the middle of a project to hike up the costs and increase their profit.
You’re probably well aware that some contractors don’t approach their work with the best intentions. But unless you’re aware of the specific scams they may employ, you could become the next victim.
Don’t Get Pushed Over or Exposed
In order to avoid getting screwed over by a lazy or dishonest contractor, you’ll want to keep the following practices in mind.
1. Interview at Least Three Contractors
It’s rarely if ever a smart idea to hire the first contractor who gives you a quote. In general, you should try to interview at least three candidates before settling on your choice. An array of quotes should give you a strong idea of the fair market price in your area, as well as some of the different methods various contractors might use (good and bad).
2. Ask About the Crew
Never assume that a contractor will be doing the work personally, or even that the candidate has a regular crew to handle the project. Make sure you ask specifically about the work agreement and whether the bidder intends to sub-out the work, which tasks will get outsourced, and which will be handled “in-house.” Subcontracting isn’t necessarily a bad practice, but it can easily entail less direct control and accountability.
3. Get a Detailed Quote
It’s okay for a contractor to offer you a soft quote in the initial stages of estimating a project, but before signing any paperwork, you should receive a much more detailed document that breaks down the individual line items. The more specific you can get the contractor to be, the better. This discourages the company from coming back and claiming you are supposed to supply various items or materials.
4. Vet and Verify the Contractor
It’s one thing to feel comfortable with a contractor, but you need to make sure the people are who they say they are. Thanks to the Internet, it’s become much easier to vet and verify contractors online than it used to be. Run a Google search, review the firm’s BBB rating, and search contractor review sites for additional information and testimonials.
5. Never Do a Percentage Draw
“The most important thing you’ll do with contractors is figure out your draw schedule,” licensed inspector Doug Smith writes. “There are two kinds of draws. There are completion draws and percentage draws. Completion draws are: you put the new roof on and I’ll pay you for it. Percentage draws are: well, I’ve got half the roof on, can I have half the money?”
Never, under any circumstances, accept a percentage draw. This can create huge challenges and may leave you stuck with a partially finished project. A completion draw, on the other hand, motivates the contractor to finish so the firm can get paid.
6. Ask About License and Insurance
Each state has its own specific rules and regulations, but a general contractor is always required to hold some sort of license and insurance. If the bidder can’t provide specific information about both of these, you should refuse to do business with the company.
7. Pay Attention to Communication Skills
Communication plays a crucial role in the success of a residential project. If you call a contractor and find yourself waiting a couple of days to hear back, this is poor communication. You want someone who is responsive and easy to reach. Anything less could be a harbinger of bad things to come.
8. Stand Your Ground
“Crooked home improvement contractors often resort to bullying, intimidation and threats to get what they want. They might push for more money, threaten to sue, warn they plan to file a lien or stop working and threaten to abandon your project completely,” industry insider Jason Michael White says.
If you find yourself working with an aggressive contractor, you’ll have to stand your ground and let him or her know that you won’t be stepped on. You may have to do this several times before the manager realizes you’re serious.
Surround Yourself With Honest People
In your career, as in your personal life, you are the sum of the people you spend the most time with. When you’re a real estate investor, this means the professionals you engage will inevitably rub off on you and shape the way you handle various matters.
These people will include contractors, business partners, and property managers. At Green Residential, we don’t just offer professional property management in Houston. We also back up our work with transparency, honesty, and a high moral code that drives our decision making and influences the way we interact with our clients and partners in the community.
If you want to work with a company that cares about more than just the bottom line, we’re here to help. Get in touch with us and we’d be happy to discuss our services in more detail