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
payments;
- 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
long guarantees;
- 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 scam.
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 in progress.
- 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 project.
Checking References
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
the contractor?
- Would you use the
contractor again?
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
agency.
- 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.
The "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 how.
Don't:
- 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 loan terms.
Getting a Written Contract
Contract requirements
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 and stains.
- 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 to
cancel.
Keeping Records
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 is complete.
Check
that:
- 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.
Where to Complain
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 and help:
- State and local
consumer protection offices.
- Your state or local
Builders Association and/or Remodelors Council.
- Your local Better
Business Bureau.
- Action line and
consumer reporters. Check with your local newspaper, TV, and radio stations for
contacts.
- Local dispute
resolution programs.
For More Information
- Federal Trade
Commission
www.ftc. gov 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 Home Builders Remodelors Council
www.nahb.org To order a free copy of
How to Find a Professional Remodeler, send a self-addressed
stamped envelope to:
NAHB Remodelors Council Dept. FT 1201 15th Street, NW Washington,
DC 20005
- National Association of Consumer Agency Administrators
www.nacaa.net/index.php 1010 Vermont
Avenue, NW Suite 514 Washington, DC 20005 E-mail form:
www.nacaa.net/contact.htm
Federal
Trade Commission Bureau of Consumer Protection Office of Consumer
and Business Education |