How you can avoid construction fraud


Americans are on the move. 

The pandemic has triggered an unprecedented game of musical chairs, but with homes. In just the past 18 months, millions have moved away from smaller dwellings and crowded cities. 

The exodus is most dramatic in our largest, most expensive and most densely populated cities like New York, Chicago, San Francisco and Los Angeles. In Manhattan and Brooklyn, according to change of address data from the US Postal Service, the exit out of NYC has more than quadrupled.

We are moving to exurbs (yes, that’s a thing) and rural pastures, in some cases thousands of miles away. We are moving to mountaintops, farmlands and beachfronts. We are buying properties sight unseen — and paying ungodly prices for them.

What the heck is going on?

The threat of COVID-19 has created a new world order. As remote work suddenly became an option, people had the freedom to live anywhere. Untethered, we broke free, like so many cattle through a busted split-rail fence.

And with this open space comes even more social distancing, away from the crowds, congestion, traffic and hopefully an escape from the deadly disease. Fresh air and afresh start.

Unfortunately, there has been some buzzkill attached to these new American dreams. Montgomery Insurance Services has been monitoring a disturbing spike in home improvement scams, a cottage industry of contractors less than trustworthy and, in some cases, criminally motivated.

If your family is on the move — or simply just renovating your current home — here are someways to spot scammers and frauds before they take your money and run.

Stranger Danger

Be wary of contractors who “happen to be in the neighborhood” and spot some work you need done. They often claim they can offer you a lower price on repairs by using surplus materials they just happen to have in their unmarked van. Don’t buy it. Don’t be pressured to “sign now” for an amazing discount. Ask to see ID, state license and/or a certificate of liability insurance. And never offer a payment upfront without first seeing those docs.  

Such a Deal

Speaking of upfront payments, be suspect of lowball estimates. The cheapest deal is rarely the best deal for quality work. Before hiring a contractor, get three bids from legitimate contractors, check references and chat with neighbors who may have used them before. Only then should you consider offering a deposit. Note, too, that each state has different regulations regarding the amount a contractor can require in advance.

No Contract, No Job.

Avoid any contractor who claims a contract is unnecessary. This type of scam is typical after a natural disaster such as a hurricane, tornado or flood that causes considerable damage to your property. Homeowners will invariably get burned by a much higher price when the work is complete — if it’s even completed at all. Always ask fora contract that outlines the work, materials, price and payment terms.

Check References

Yes, it’s time consuming. But references speak volumes about a contractor's legitimacy and ethics. Get at least three references, ask about the quality of the work, ask about unexpected cost bumps, ask about work stoppages or delays.And if you can see a completed job first-hand or by photos, even better.

Don't Pull Permits

Not ever. Always place that responsibility on the contractor, since ethical contractors will never ask you to do it. If a contractor claims you can save money by pulling the permit yourself, it often means he is unlicensed or working with a revoked license. Whoever pulls the permit is fully responsible for the project and any failures or inspections. If you are ever asked to pull the permit, it’s a red flag.

According to the Better Business Bureau, residential contractor fraud is the No. 1 complaint by homeowners. Don’t be victimized—especially if you are about to embark on a major repair or remodel. Talk to a Montgomery agent on how you can protect yourself and your home from scammers, and how a tailored Homeowner’s Insurance policy can help mitigate that risk.

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