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How to Avoid Getting Scammed by a Contractor

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Let’s face it, being a landlord is no walk in the park.  You’re always the bad guy, yet YOU are the one who has to continuously deal with deadbeats and con artists in your day-to-day management of your investment property.  This includes tenants as well as contractors.  In fact, the poor economy has caused an uptick in fraudulent activity.  Cons like requiring money down for work that never happens, or purposefully cutting corners to expedite the completion of a job, are two common examples.  What follows are a few tips to help you avoid getting scammed by a contractor.

First and foremost, keep an eye out for a few common red flags.  If the contractor is dramatically underbidding everyone else, is making exorbitant promises that seem to good to be true, or exclusively uses only a cell phone, beware.  In these cases, ask lots of questions, and ask for referrals and credentials.  Chances are, he’ll say that he’ll have to get back to you but you’ll never hear from him again.

If the contractor passes this “BS test,” the next step is to validate his identity.  Shady contractors will often use aliases so they cannot be tracked down, which empowers them to take advantage of you without any fear of getting caught.  So you must check their photo ID.  You’ll also want to see if the contractor is listed in the Yellow Pages or online, has a business card, business phone number, etc., all of which can be easily verified.

Once you’ve verified the contractor’s identity, you’ll next want to perform a little due diligence on their reputation and quality of work.  Call a couple references, and run the contractor’s name or business through the Better Business Bureau.  You could even Google the contractor’s name and see what comes up.  Also, make sure he is licensed to perform work in your state, and is not on any state-specific blackball lists.

Finally, never pay in advance.  Once you’ve verified the contractor’s identity and reputation, it’s ok to put a small amount down as a retainer (say, 30%), but never pay for a job 100% in advance.  If you do, you’re not only opening yourself up to fraud, but you’re also removing any incentive the contractor has to perform the job correctly and on time.  Additionally, always pay with a credit card instead of cash.  This way, if you get burned, at least you’ll be able to dispute the credit card charge.

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