Your home may be your
most valuable financial asset. That's why it's important to be cautious
when you hire someone to work on it. Home improvement and repair
and maintenance contractors often advertise in newspapers, the Yellow
Pages, and on the radio and TV. However, don't consider an ad an
indication of the quality of a contractor's work. Your best bet
is a reality check from those in the know: friends, neighbors, or
co-workers who have had improvement work done. Get written estimates
from several firms. Ask for explanations for price variations. Don't
automatically choose the lowest bidder.
Home Improvement Professionals
Depending on the size
and complexity of your project, you may choose to work with a number
of different professionals:
- General Contractors manage all aspects
of your project, including hiring and supervising subcontractors,
getting building permits, and scheduling inspections. They also
work with architects and designers.
- Speciality Contractors install particular
products, such as cabinets and bathroom fixtures.
- Architects design homes, additions, and
major renovations. If your project includes structural changes,
you may want to hire an architect who specializes in home remodeling.
- Designers have expertise in specific areas
of the home, such as kitchens and baths.
- Design/Build Contractors provide onestop
service. They see your project through from start to finish. Some
firms have architects on staff; others use certified designers.
Don't Get Nailed
Not all contractors operate
within the law. Here are some tip-offs to potential rip-offs. A
less than reputable contractor:
- solicits door-to-door;
- offers you discounts
for finding other customers;
- just happens to have
materials left over from a previous job;
- only accepts cash
- asks you to get the
required building permits;
- does not list a business
number in the local telephone directory;
- tells you your job
will be a "demonstration; "
- pressures you for
an immediate decision;
- offers exceptionally
- asks you to pay for
the entire job upfront;
- suggests that you
borrow money from a lender the contractor knows. If you're not
careful, you could lose your home through a home improvement loan
Hiring a Contractor
Interview each contractor
you're considering. Here are some questions to ask.
- How long have you been in business? Look
for a well-established company and check it out with consumer
protection officials. They can tell you if there are unresolved
consumer complaints on file. One caveat: No record of complaints
against a particular contractor doesn't necessarily mean no previous
consumer problems. It may be that problems exist, but have not
yet been reported, or that the contractor is doing business under
several different names.
- Are you licensed and registered with the state?
While most states license electrical and plumbing contractors,
only 36 states have some type of licensing and registration statutes
affecting contractors, remodelers, and/or specialty contractors.
The licensing can range from simple registration to a detailed
qualification process. Also, the licensing requirements in one
locality may be different from the requirements in the rest of
the state. Check with your local building department or consumer
protection agency to find out about
licensing requirements in your area. If your state has licensing
laws, ask to see the contractor's license. Make sure it's current.
- How many projects like mine have you completed in the
last year? Ask for a list. This will help you determine
how familiar the contractor is with your type of project.
- Will my project require a permit? Most states
and localities require permits for building projects, even for
simple jobs like decks. A competent contractor will get all the
necessary permits before starting work on your project. Be suspicious
if the contractor asks you to get the permit(s). It could mean
that the contractor is not licensed or registered, as required
by your state or locality.
- May I have a list of references? The contractor
should be able to give you the names, addresses, and phone numbers
of at least three clients who have projects similar to yours.
Ask each how long ago the project was completed and if you can
see it. Also, tell the contractor that you'd like to visit jobs
- Will you be using subcontractors on this project?
If yes, ask to meet them, and make sure they have current insurance
coverage and licenses, if required. Also ask them if they were
paid on time by this contractor. A "mechanic's lien" could be
placed on your home if your contractor fails to pay the subcontractors
and suppliers on your project. That means the subcontractors and
suppliers could go to court to force you to
sell your home to satisfy their unpaid bills from your project.
Protect yourself by asking the contractor, and every
subcontractor and supplier, for a lien release or lien waiver.
- What types of insurance do you carry?
Contractors should have personal liability, worker's compensation,
and property damage coverage. Ask for copies of insurance certificates,
and make sure they're current. Avoid doing business with contractors
who don't carry the appropriate insurance. Otherwise, you'll be
held liable for any injuries and damages that occur during the
Talk with some of the
remodeler's former customers. They can help you decide if a particular
contractor is right for you. You may want to ask:
- Can I visit your home
to see the completed job?
- Were you satisfied
with the project? Was it completed on time?
- Did the contractor
keep you informed about the status of the project, and any problems
along the way?
- Were there unexpected
costs? If so, what were they?
- Did workers show up
on time? Did they clean up after finishing the job?
- Would you recommend
- Would you use the
Understanding Your Payment Options
You have several payment
options for most home improvement and maintenance and repair projects.
For example, you can get your own loan or ask the contractor to
arrange financing for larger projects. For smaller projects, you
may want to pay by check or credit card. Avoid paying cash. Whatever
option you choose, be sure you have a reasonable payment schedule
and a fair interest rate. Here are some additional tips:
- Try to limit your
down payment. Some state laws limit the amount of money a contractor
can request as a down payment. Contact your state or local consumer
agency to find out what the law is in your area.
- Try to make payments
during the project contingent upon completion of a defined amount
of work. This way, if the work is not proceeding according to
schedule, the payments also are delayed.
- Don't make the final
payment or sign an affidavit of final release until you are satisfied
with the work and know that the subcontractors and suppliers have
been paid. Lien laws in your state may allow subcontractors and/or
suppliers to file a mechanic's lien against your home to satisfy
their unpaid bills. Contact your local consumer agency for an
explanation of lien laws where you live.
- Some state or local
laws limit the amount by which the final bill can exceed the estimate,
unless you have approved the increase. Check with your local consumer
- If you have a problem
with merchandise or services that you charged to a credit card,
and you have made a good faith effort to work out the problem
with the seller, you have the right to withhold from the card
issuer payment for the merchandise or services. You can withhold
payment up to the amount of credit outstanding for the purchase,
plus any finance or related charges.
"Home Improvement" Loan Scam
A contractor calls or
knocks on your door and offers to install a new roof or remodel
your kitchen at a price that sounds reasonable. You tell him you're
interested, but can't afford it. He tells you it's no problem -
he can arrange financing through a lender he knows. You agree to
the project, and the contractor begins work. At some point after
the contractor begins, you are asked to sign a lot of papers. The
papers may be blank or the lender may rush you to sign before you
have time to read what you've been given to sign. You sign the papers.
Later, you realize that the papers you signed are a home equity
loan. The interest rate, points and fees seem very high. To make
matters worse, the work on your home isn't done right or hasn't
been completed, and the contractor, who may have been paid by the lender, has little
interest in completing the work to your satisfaction.
You can protect yourself from inappropriate lending practices. Here's
- Agree to a home equity
loan if you don't have enough money to make the monthly payments.
- Sign any document
you haven't read or any document that has blank spaces to be filled
in after you sign.
- Let anyone pressure
you into signing any document.
- Deed your property
to anyone. First consult an attorney, a knowledgeable family member,
or someone else you trust.
- Agree to financing
through your contractor without shopping around and comparing
a Written Contract
vary by state. Even if your state does not require a written agreement,
ask for one.
A contract spells out the who, what, where, when and cost of your
project. The agreement should be clear, concise and complete.
A Written Contract
A written contract spells out
the who, what, where, when and cost of your project. The agreement
should be clear, concise and complete.
Before you sign a contract,
make sure it contains:
- The contractor's name,
address, phone, and license number, if required.
- The payment schedule
for the contractor, subcontractors and suppliers.
- An estimated start
and completion date.
- The contractor's obligation
to obtain all necessary permits.
- How change orders
will be handled. A change order - common on most remodeling jobs
- is a written authorization to the contractor to make a change
or addition to the work described in the original contract. It
could affect the project's cost and schedule. Remodelers often
require payment for change orders before work begins.
- A detailed list of
all materials including color, model, size, brand name, and product.
- Warranties covering
materials and workmanship. The names and addresses of the parties
honoring the warranties - contractor, distributor or manufacturer
- must be identified. The length of the warranty period and any
limitations also should be spelled out.
- What the contractor
will and will not do. For example, is site clean-up and trash
hauling included in the price? Ask for a "broom clause." It makes
the contractor responsible for all clean-up work, including spills
- Oral promises also
should be added to the written contract.
- A written statement
of your right to cancel the contract within three business days
if you signed it in your home or at a location other than the
seller's permanent place of business. During the sales transaction,
the salesperson (contractor) must give you two copies of a cancellation
form (one to keep and one to send back to the company) and a copy
of your contract or receipt. The contract or receipt must be dated,
show the name and address of the seller, and explain your right
Keep all paperwork related
to your project in one place. This includes copies of the contract,
change orders and correspondence with your home improvement professionals.
Keep a log or journal of all phone calls, conversations and activities.
You also might want to take photographs as the job progresses. These
records are especially important if you have problems with your
project - during or after construction.
Completing the Job: A Checklist
Before you sign off and
make the final payment, use this checklist to make sure the job
- All work meets the
standards spelled out in the contract.
- You have written warranties
for materials and workmanship.
- You have proof that
all subcontractors and suppliers have been paid.
- The job site has been
cleaned up and cleared of excess materials, tools and equipment.
- You have inspected
and approved the completed work.
If you have a problem
with your 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 you can't get satisfaction,
consider contacting the following organizations for further information
- State and local consumer
- Your state or local
Builders Association and/or Remodelors Council.
- Your local Better
- Action line and consumer
reporters. Check with your local newspaper, TV, and radio stations
- Local dispute resolution
- Federal Trade Commission
The FTC works for the consumer to prevent fraudulent, deceptive
and unfair business practices in the marketplace and to provide
information to help consumers spot, stop and avoid them. To file
a complaint, or to get free information on any of 150 consumer
topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use
the complaint form at www.ftc.gov. The FTC enters Internet, telemarketing,
identity theft and other fraud-related complaints into Consumer
Sentinel, a secure, online database available to hundreds of civil
and criminal law enforcement agencies in the U.S. and abroad.
- National Association
of Consumer Agency Administrators
1010 Vermont Avenue, NW
Washington, DC 20005
Bureau of Consumer Protection
Office of Consumer and Business Education