Key Takeaways

  • Since 2007, 109,000 home improvement scams have been reported to the Federal Trade Commission (FTC).

  • Scammers often seek out older homeowners, believing them to be more trusting, wealthier, and more likely to have memory or cognitive problems.

  • How can you avoid home improvement fraud? Know the telltale warning signs of a scam—and ways you can ensure a contractor is trustworthy.

In early 2023, Massachusetts police arrested a man in relation to a home improvement scam that targeted a local homeowner. The victim alleged that the contractor and an associate quoted him a high price for basement repairs, damaged his home's foundation, and never returned to finish the work—even after accepting thousands of dollars in payments.

This is far from an isolated case. Since 2007, 109,000 home improvement scams have been reported to the Federal Trade Commission (FTC), resulting in $206.9 million in losses in roughly that same time period.1

“Scammers often seek out older homeowners, since they believe them to be more trusting, wealthier, and more likely to have memory or cognitive problems,” says Genevieve Waterman, Director of Economic & Financial Security at NCOA. “That’s why this population needs to be especially aware.”

While home improvement scams (often referred to as handyman scams) are common, they’re not always easy to spot. Learning about this type of financial scam can help you identify fraudsters faster and protect your home and money.

What are home improvement scams?

These scams can take many forms. Below are some typical scenarios for home improvement scams:

  • The “free” inspection. This type of home improvement scam may start with a knock at the door or a phone call. The scammer tells you they noticed a problem with your house (an old and damaged roof, for example). They offer to inspect the issue at no cost, and then provide a quote that seems reasonable. The person may claim their price is deeply discounted due to an oversupply of materials or a similar made-up reason. When you agree to let them do the work, they demand 100% payment up front or a large deposit. Often, they request that you use an uncommon payment method, such as an online money transfer or prepaid debit card. They take your money—and never come back to complete the work.
  • The offer of cheap post-disaster repairs. With this home improvement scam, you may receive a phone call or visit from a fake contractor after a bad storm or other natural disaster damages your house. They say they’re offering affordable repair services to all your neighbors, claiming that if you use them, you can get reimbursement through your homeowners’ insurance. You give them a deposit, but the job either never gets completed—or it’s done poorly and you’re unable to contact them to follow up.
  • The home improvement project that snowballs. This home renovation scheme usually begins with hiring a contractor to complete a small job at your house. When they arrive to do the work, they point out other, costlier “issues” that demand immediate attention. If you tell them you’re not interested, they may threaten to walk away and leave your project unfinished. Or they may intentionally perform poor-quality work to ensure you’ll be calling them again soon for more repairs.

8 warning signs of a handyman scam

Home improvement scams are also sometimes referred to as handyman scams. Wondering how to tell if a contractor is legitimate? There are some red flags to watch out for when you contact—or you're approached by—a person claiming to be a professional contractor or handyperson:

  1. They ask for payment in a form that’s harder to trace or recover—such as cash, prepaid debit cards, or money transfer through a digital payment platform.  
  2. They claim they have construction materials “left over” from another job to justify giving you a steep price discount.
  3. They try to arrange financing for your project; for example, recommending a specific lender offering home renovation loans.
  4. They demand full payment for the job up front.
  5. They tell you that you need to obtain any necessary building permits (this is normally the contractor’s responsibility).
  6. They try to persuade you to sign over a claim payment from your insurance company (after damage to your home from a natural disaster).
  7. They pressure you to make an immediate decision to hire them.
  8. They refuse to sign a contract, insisting instead on a “handshake deal.”

How can I avoid home improvement scams?

Scammers will always be on the prowl, looking for inventive new ways to part honest people with their hard-earned money. But there are steps you can take to avoid becoming the victim of a handyman scam:

  • Ask for references: Since they’ve likely left a trail of deception behind them, criminals will be reluctant to share this information. They also won’t stick around while you do your “homework.” Even better than asking for references? Get contractor and handyperson recommendations only from people you know and trust.
  • Find vetted contractors: Contractors who belong to the National Association of the Remodeling Industry (NARI) meet strict standards for quality and integrity. Look for professional remodelers on their website.
  • Get it in writing: A binding contract outlining your project scope and costs can provide assurance that your home improvement project is completed correctly and on time.
  • Hire only contractors who are licensed and insured: Check with your state’s licensing agency to see if a contractor you’re considering has the proper licensure and certifications to do the work in question.
  • Read online reviews from other homeowners: Do a bit of digging online when you’re considering hiring a contractor. What have other customers said about the company’s or individual’s performance and professionalism?
  • Never pay in full up front: Reach out to your state consumer protection office to see if there are any laws limiting how much of a deposit contractors can require. Do not make a final payment until the project is 100% complete and you’re satisfied with the results.

What should I do if I think a contractor scammed me?

If you think you've been scammed, you may be tempted to keep it to yourself. But it’s important to speak out about suspected home improvement scams. Tell a trusted friend or family member what happened, and report the incident by contacting one (or all) of the following agencies:

If your home renovations or repairs were funded by a U.S. Department of Housing and Urban Development (HUD) loan, you can report contractor fraud by calling toll-free 800-225-5342 or TTY 800-877-8339.

This content on payment scams was developed in partnership with Zelle®. Zelle® and the Zelle® related marks are property of Early Warning Services, LLC.

Source

1. Fraudulent contractors tend to lure customers after major storm damage. KCEN-TV. Found on the internet at https://www.kcentv.com/article/news/crime/be-mindful-of-scam-contractors/500-4b449f83-8c12-44b6-be4e-48c79096fe49