Top 6 Home Renovation Scams To Avoid

Michael Sanibel, Investopedia.com, Oct 18, 2010

Scam artists are nothing new, but there are plenty of reasons to predict there will even more of them due to tough economic times . While they tend to prey on the elderly, anyone who is not cautious and informed is a potential victim. Your best defense is a skeptical mind and knowing what to look out for when you hear that offer that’s “too good to refuse.” Here are some of the most popular, and costly, home improvement scams.

1. One-Time Special
It’s a very rare business that’s had only one sale in its entire history. The reality is that most businesses hold sales throughout the year, and that’s not likely to change anytime soon. If a contractor approaches you with a special offer, ask for concrete evidence that the quoted price is lower than what they have charged in the past for the same work. This could include a past catalog, special mailing, a dated price list or evidence of identical work for a past customer. Don’t be pressured into accepting a deal that will expire before you’ve had a chance to do research, get competing bids and check references.

2. I Might As Well
Be wary of the contractor who knocks on your door and says he’s working just down the street. He tells you he noticed a few things that need some work on your house and that you could save money by hiring him on the spot. Coincidentally, he just happens to have all the materials and tools to start right away. This approach is often used to entice you into doing things that are visible from the outside like roof repair, painting, window caulking, deck restoration, driveway coating and chimney repair. If the contractor claims to have all the materials, ask him where they came from and who paid for them. If they are left over from an earlier job, there’s some chance that the previous homeowner footed the bill.

3. Cash before Work
Nothing should set off more alarm bells than the contractor who wants to be paid in full for a project before it’s started. This arrangement sets you up for a disappearing contractor who never starts the work. A reasonable down payment is expected to cover startup labor costs and materials. Normally, this should not exceed one-third of the total contract value and it’s wise to make it as small as possible. The balance of the money can be tied to completion milestones to keep the contractor motivated to stay on schedule. Hold a sizable portion of the money until the project is finished, and make final payment dependent on your personal inspection and satisfaction.

4. Financing Offers
Another warning flag is the offer to arrange financing  to pay for your renovation, sometimes from a lender that the contractor knows personally. The offer may include a special interest rate for a limited time only. What won’t be disclosed is that the contractor may be getting kickbacks or other favors from the lender. If you don’t review the loan papers carefully, you may later find out that you’ve signed up for a refinancing or high-interest home equity loan, or unknowingly transferred your deed. If the money goes to the contractor, there’s no incentive to complete the work. Always shop around for the best loan available , and consult an attorney if you need help understanding the terms and conditions.

5. Fly-By-Night Contractor
Be extremely wary if a contractor pulls into your driveway in an unmarked truck. If you talk to him, do it outside in public view. Anyone that enters your home is a potential burglar, or worse. If the truck has out-of-state plates, don’t even waste your time. For all contractors, you should apply due diligence. Verify their name, business name and license number, address and telephone number. Ask for their insurance papers, and verify that they are bonded in accordance with applicable laws.

6. Model Home
Beware of the contractor who wants to fix up your home so he can show it off to other potential customers. In exchange for your agreement to the proposed work, you will likely be tempted with a deal that seems too good to pass up. Chances are pretty good that some or all of the work he’s recommending doesn’t really need to be done. Reputable contractors don’t need models to showcase their work and if they needed one, they wouldn’t use an occupied home for that purpose.

The Bottom Line Use resources such as the Better Business Bureau, Department of Consumer Protection, and the local license board to check the contractor’s business reputation and credentials. A history of consumer complaints, lawsuits and expired licenses are all reasons to keep looking for a reliable contractor. Common sense and good judgment offer the best protection from home renovation scams. If it seems too good to be true, it probably is. It’s always wise to get multiple estimates before starting any project and if there are wide differences in the quotes, try to figure out why. Most importantly, don’t sign any contract that you don’t understand completely.

4 Home Upgrades That Don’t Pay – Amy Bell


If   you’re getting ready to put your house on the market, you have my condolences. It’s no secret that the real estate market is extremely tough right now, particularly for sellers. Because the U.S. housing market is flooded with unsold inventory,   homebuyers have countless choices available to them –   which gives them all the power. If your   home   doesn’t   suit their fancy, they’ll simply move along to   next   house   on their   mile-long property list.   (Read   Selling Your Home In A Down Market   and   Closing A Real Estate Deal In A Down Market   for some tips on how to make it easier to sell your house.)

With this in mind, you’re probably thinking about making some home upgrades that are certain to attract flocks of admiring buyers. While it’s certainly a smart move to make a few  improvements, don’t overdo it. If you spend stacks of cash on remodeling expenses, you’ll probably never recoup your investment – especially in this buyer’s market.

So how do you know which upgrades are worth the hassle and which ones aren’t? For the most part, real estate experts agree that new kitchen countertops and appliances, bathroom remodels and energy-saving improvements will pay off in the long run. On the other hand, pros point out that these four upgrades aren’t worth your time and money.

1.   Over-the-Top Improvements
Before you invest tons of money into an elaborate full-house renovation project, consider what the competing properties in your neighborhood have to offer. While you want your house to stand out from the competition, you shouldn’t make unwarranted upgrades that greatly exceed other properties in the area.  Not only will you end up losing money, but you may even scare off potential buyers.

Look at it this way: Let’s say you show up to your nephew’s third birthday party wearing a ball gown when all the other guests are wearing jeans and t-shirts. Wouldn’t you feel a little out of place? Likewise, if you were to transform your cozy cottage into a luxurious, three-story mansion, it would probably stick out like a sore thumb in your neighborhood of modest ranch-style homes.

Find out how similarly priced homes in your neighborhood measure up, and make improvements based on your specific marketplace.

2.   Swimming Pools This one is a big surprise for many homeowners. Believe it or not, a swimming pool rarely adds value to a home in this day and age. First of all, it usually costs a small fortune to have an in-ground swimming pool installed. Secondly, you’re probably not going to recoup your investment. Why? Because many homebuyers view an in-ground swimming pool as a high-maintenance hassle and safety hazard.

When a homebuyer sees an in-ground pool in your backyard, they may have visions of spending ridiculous amounts of money and time on pool maintenance chores. Plus, buyers with young children often steer clear of homes with pools because of safety concerns. In other words, home buyers are more likely to view your in-ground pool as an inconvenience – not a selling point.

3.   Replacing a Popular Feature Before you consider making a major home change, such as converting your garage into a game room, take a look around. If every other home in your neighborhood boasts a two-car garage, you should probably think twice. Do you really want to be the only house in the area with no garage? Most homebuyers would prefer to have a sheltered place to park their car than a room to play ping pong and darts.

4.   Daring Designs We all want to design and decorate our home so that it reflects our unique style. However, if you’re trying to sell your home, now is not the time to incorporate bold design choices into the décor. For example, if you have lime-green granite countertops, leopard-print wallpaper, lavender carpet and an elaborate mural of chubby cherubs painted on your bedroom ceiling, one look will send home buyers dashing for the door.

If your home beams with your eclectic tastes, try to tone it down before you plant that “For Sale” sign in the front yard. Tear down the flamingo wallpaper and slap a fresh coat of neutral-colored paint on the walls. Replace the lilac carpet with a standard beige or brown, and get rid of any extremely personal features that would be considered “abnormal” as opposed to “traditional.” Homebuyers should be able to imagine themselves living in your home – and that’s practically impossible to do if there are mounted deer heads peering down at them from the walls of every room.

Overall, it’s good to put some work into your house before you try to sell it, as it can add value and make it more attractive to potential buyers. However, there are some things that will have the buyer running for the door – or will at least not add anything to the house’s closing price. Keep these things in mind when you’re getting ready to put up that “For Sale” sign. (For more on selling your house, check out Top 4 Things That Determine A Home’s Value   and Will You Break Even On Your Home?