Educational Consumer Tips
Author: Better Business Bureau
Before talking with home improvement contractors, you should know that, in Texas, a homeowner cannot legally use a home improvement loan to pay off other financial obligations or receive cash "kickback" from a contractor.
Do not be tempted by a smooth-talking salesman; if you are, you may loose your home.
For your protection, when signing the required notarized truth-in-lending statement, be sure the date you sign your name and the date on the contract coincide. You will have three days from that date to cancel the contract if you have second thoughts about the deal.
Finally, do not sign a completion certificate until the contracted work has been completed and you are satisfied thoroughly.
Here is a list of steps to follow as you walk with various contractors and compare bids:
1. Find out if the contractors you are considering have a business address and telephone number. Check a current telephone directory to see if the contractors are listed. This will tell you if a contractor has been in business for about one year or more.
2. If you get several different bids, make sure they are based on the same specifications.
3. Be certain that the quality, brand, grade, weight, color, and size of materials to be used are stated in the contract.
4. Always get receipts for any money paid. If full payment is made in cash, be sure to obtain written verification of payment for the contractor with a list of the labor and material charges covered by the payment.
5. Check to see if the guarantee or warranty is disclosed. If not, get it in writing. Take time to read the guarantee or warranty and ask yourself the following questions: Is the entire job under warranty or only certain materials? Is labor included? Who will honor the guarantee, the dealer or the manufacturer? Remember, a guarantee is only as good as the firm standing behind it.
6. Does the company provide liability and workman's compensation insurance to protect you in the event of an accident on the job?
Insist on seeing a statement of coverage from the contractor's insurance agent.
7. Be sure the contract provides for a completion date and contains all topics discussed and promises made.
8. Ask the contractor for the name of the bank where he or she has a business account. Also, ask for a list of customer references. Contact the bank, and ask the references what their experiences were with the contractor.
9. If you are about to spend a great deal of money to improve your home, have an attorney review any contract or agreement before paying any money or signing your name.
10. Remember to get copies of anything you sign, including the contract and completion certificate.
Whether you are planning a small repair project, like repaving your driveway, or a more extensive project, like adding a family room to your home, it pays to look beyond the lowest bid when selecting a contractor.
Right from the start, you can eliminate what are likely to be less-than-reputable contractors by considering a list of traits common to rip-off artists. Both the Federal Trade Commission and the Better Business Bureau have found the following to be indications that a contractor may not be interested in satisfying customers:
- Solicits door-to-door: Be suspicious of contractors who attempt to gain business by visiting door-to-door. "Cold calls" can sometimes mean that the contractor is not from a local, established business but is instead just passing through and trying to make a quick buck.
- Has materials left over from a previous job: It is not your lucky day when a contractor shows up on your doorstep offering a cut-rate price on a project because they have materials left over from a recent job at your neighbor’s house or the house “down the street.” This is a common ploy of fly-by-night operators or handymen who are based out-of-state and use their pick-up trucks as their place of business.
- Asks you to get the required building permits: This could be a sign that the contractor is hoping to avoid contact with the local agency that issues such permits. Perhaps he is not licensed or registered, as required by your state or locality. A competent contractor will get all the necessary permits before starting work on your project.
- Does not list a business phone number in the local directory: This can be a red flag indicating that the contractor does not have an established business presence in-state. Or, that he perhaps relies on a home answering machine to “screen” customer calls.
- Pressures you for an immediate decision: A reputable professional will recognize that you need time to consider many factors when deciding which contractor to hire. You will want to check references; look into the contractor’s standard of work and his professional designations and affiliations; verify his insurance; check to see if he needs a license (and if so, that it is valid); get written estimates from several firms based on identical project specifications, and, contact the Better Business Bureau and local consumer protection agency to see if they have information.
- Asks you to pay for the entire job up-front or demands only cash: Whatever the reason, never pay for the entire project upfront. Payments should be by credit card of check so that your credit card statement or cancelled check can provide proof of payment, if needed. Do not pay anything until after the first day of work, and then pay up to one-third. Make additional payments during the project contingent upon completion of a defined amount of work. Do not make the final payment or sign an affidavit of final release until you are satisfied with the work and have proof that the subcontractors and suppliers have been paid.
- Suggests you borrow from a particular lender: Do not agree to financing through your contractor or someone he suggests. Many people have been ripped off when they agreed to use the suggested lender; sign a lot of papers in a rush; and find out later that they had agreed to a home equity loan with a very high rate, points and fees. Secure financing on your own by shopping around and comparing loan terms.