Why are contractor scams suddenly on the rise?

Photo (c) Dana Neeley - Getty Images

A new study points to two reasons

A workman knocks on your door, says he’s doing work for one of your neighbors and has materials left over. He’s willing to make you a deal on resurfacing your driveway, or replacing your windows or building a new deck.

Except that he collects upfront money and disappears or does the work but does a substandard job. It’s an old scam that doesn’t get a lot of attention these days because it doesn’t involve technology, but since the pandemic and recent severe weather outbreaks, it has exploded.

A recent study by JW Surety Bonds, a bonding agency, found that one in 10 Americans have been a victim of a contractor scam, losing an average of $2,426. Of those victims, about a third didn’t get ripped off by a stranger knocking on their door but by a contractor referred by someone they knew.

Over 50% said they were scammed even though they checked the contractor’s credentials before hiring them. Baby boomers were the most likely to fall victim, in large part because that demographic group is most likely to own a home.

Where the money is

Why the surge in home contractor scams? Because scammers tend to go where the money is.

During the pandemic, there was a big increase in home improvement projects. People were spending more time at home and the demand for remodeling contractors rose sharply.

In the last year or two there have been natural disasters, such as tornado outbreaks, that damaged homes. As homeowners looked for someone to do the work, scammers stepped in to fill the void.

The study found that the most common contractor scam – reported by 34% of victims – was someone who actually did the work but did it quickly, providing low-quality results without a contract.

Twenty-three percent of victims said their contract provided a very low estimated cost and then increased the price by the end of the job, while 22% said their contractor demanded a large upfront payment and then did a poor job.

Top five contractor actions

The top five contractor actions that alerted scammed clients to the fraud were:

  1. Didn’t complete the job or did poor quality work that failed to meet agreed-upon standards (63%)

  2. Frequently arrived late or missed appointments without a valid reason (40%)

  3. Added extra charges or fees not previously discussed (26%)

  4. Refused to answer questions or was evasive about progress updates (25%)

  5. Provided either no written contract or a vague contract without job specifics or costs (13%)

Performing due diligence before hiring a contractor may help you avoid fraud. License requirements will vary state-to-state so a good place to start is with your city or county building permits department. Find out from official sources whether the project needs a permit.

When evaluating a contractor, check for relevant experience, customer reviews and whether the contractor is covered by personal liability insurance and worker’s compensation.

If  your project is remodeling a bathroom, be sure to check out ConsumerAffair's guide to remodeling contractors, with thousands of verified reviews.

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