There are two main types of contractor fraud – commercial contractor fraud and residential contractor fraud.
What Is Commercial Contractor Fraud?
Commercial contractor fraud or construction fraud is when a contractor or subcontractor engages in an illegal activity with a building owner, developer, general contractor, project manager or other person involved with the construction of a commercial property.
Contractor fraud is a serious issue in the construction industry, and the fraud can be perpetuated for the length of large construction projects which may take years to complete.
There are many types of commercial contractor fraud, but some of the most common ones include: bribery, extortion, kickbacks, fraudulent misrepresentation, and false claims. Contractor fraud can also involve theft of material or equipment, as well as the embezzlement of funds.
Unfortunately, commercial contractor fraud is a common occurrence. In fact, it is estimated that fraud costs the construction industry billions of dollars each year. By being aware of the warning signs and taking precautions, owners can protect themselves from becoming victims of this crime.
It is important for project owners to be able to identify contractor fraud in order to protect their investment. By knowing what to look for, they can avoid becoming a victim of this crime.
It’s always a good idea to review contracts with an attorney thoroughly and ask questions if something is not clear. An attorney can help you to verify the contractor’s license and insurance, and check to see if the contractor has any complaints filed against them.
What Is Residential Contractor Fraud?
Residential contractor fraud is also referred to as Home Improvement Fraud or Home Improvement Scams. This type of scam is commonly highlighted by local news outlets and the national media to expose the scammers as well as create an awareness on how to avoid their cons and schemes.
Residential contractor scams can take many different forms, and homeowners should be aware of the tactics that these scammers use and what they are attempting to accomplish.
It is typical for home improvement scam artists to target vulnerable consumers such as senior citizens, immigrants, and young first-time homebuyers.
Once a victim has been identified or “marked”, the scam artist will often try to convince the homeowner to perform some type of repair work on their house. Landscaping or tree trimming scams have also been known to exist.
A home repair scammer’s goal is to convince customers into paying as much as possible, so they’ll often manipulate consumers by focusing on a home improvement budget.
Most often, the so-called improvements involve shoddy or incomplete construction and materials which do nothing more than waste money and time.
In some cases, if the homeowner continues with the project but ultimately decides not to pay for any additional services, the scam artist may attempt to intimidate or even threaten physical violence if payment is not made in full immediately.
There are also the scammers who have no intention of making any repairs, and just want to steal your money.
What are Some Common Scams by Home Improvement Contractors?
A home improvement scammer typically uses one or more of the following tactics to swindle homeowners:
- Showing up uninvited to do a home inspection
- Offering a too-good-to-be-true deal on home repairs or renovations
- Stating they have leftover materials from a previous job
- Asking for or demanding a down payment before beginning work
- Making excessive promises about the quality of their work
- Not having any identification or references
- Starting work and then disappearing without finishing the job.
- Not using quality materials or doing shoddy workmanship.
- Asking for personal financial information, such as Social Security numbers, bank account numbers, etc.
- Saying they’re exempt from the law because of the size of their company
- Asking for cash, checks, or even wire transfers to pay for their work or materials
- Asking you to borrow money for the improvements from a lender they know
What Can You Do to Protect Yourself From Contractor Fraud?
In order to avoid becoming a victim of a home improvement scam, homeowners should always do their research before hiring and paying anyone. Always get multiple estimates from licensed and reputable contractors, and never pay for the whole cost of the repairs in advance.
It’s ok to respond to advertisements from reputable contractors and handymen, but it’s best to avoid working with a company who contacts you first.
No one wants to be scammed when they’re trying to improve their home. Unfortunately, scam artists are out there, ready to take advantage of unsuspecting homeowners. Here are a few tips on how to avoid home improvement scams:
- Do your research. Before hiring anyone to work on your home, do your research and ask around for recommendations. Get several quotes from different contractors and make sure you understand what is included in each quote.
- Be wary of high pressure sales tactics. If a contractor is pressuring you to sign a contract, it’s likely a scam. Walk away if someone is being pushy or making unrealistic promises. Never agree to any job quickly, no matter how good the deal sounds.
- Avoid paying in cash. Even if a contractor offers you a discount to pay in cash, never pay for home improvement work in cash. This is a red flag that the contractor may be up to no good. Always pay by check or credit card so you have a paper trail if there are any problems.
- Get everything in writing. Make sure all agreements with your contractor are in writing. This will help protect you if there are any disputes down the road. Be suspicious of contractors who want to start work before the contract is signed.
- Check for licenses and insurance. Make sure the contractor is licensed and insured. This will give you some peace of mind that they are qualified to do the work and that if something goes wrong, you can be covered.
- Some improvements may require permits. Scammers try to legitimize their offers by getting permits for certain jobs, so be sure they actually have an approval for your specific repairs before paying them because some permits can take time to obtain.
By following these tips, you can help protect yourself from contractor fraud. Remember, it’s important to be aware of the warning signs and take precautions to avoid becoming a victim of this crime.
Keep in mind that many scammers will try to take advantage of your trust. Protect yourself and your investment by being informed. Remember that if it sounds too good to be true, it probably is.
Do I Need an Attorney for Help with a Contractor Fraud Case?
If you believe that you may be the victim of contractor fraud, then contact a real estate attorney who understands commercial and residential contractor fraud today.
Contractor fraud and scam cases can be complicated and involve many different areas of law like contract law, criminal law, and real estate law. The right lawyer will not only point you toward the right course of action, but will also inform you on how to proceed and offer representation in court if necessary.