7 Ways to Detect Construction Fraud
While we would all like to believe the best in people, we, unfortunately, live in a world where we must keep our guard up – especially when we’re hiring people to come into our home. Construction fraud is becoming a growing trend and is something that people must look out for when hiring contractors. Fraud can be broadly defined as a deliberate deception to secure unlawful gain. While it might seem intimidating to sort through which contractors are legitimate and which are fraudulent, there are few ways to detect construction fraud before it happens!
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Below, I will go over a few tips to help ensure you pick the right contractor for the job.
1. Ask to see state/municipal licenses and proof of insurance
All contractors are required by law to carry licenses. If a contractor doesn’t have one, it’s safe to say they are not legitimate. When it comes to insurance, most reputable companies will have some insurance whether it’s contractor insurance, small business liability insurance or worker’s compensation insurance. If a worker shows up without any form of insurance, this can be a major red flag.
2. Check the Better Business Bureau (BBB)
This is a great resource for you to use when considering potential contractors. You can see if there are any registered complaints against a certain contractor, therefore helping you avoid construction fraud!
3. Ask for the basics
Most reputable businesses will carry things such as business cards and will be able to offer you their website information, email address, telephone number, and more. If they seem unwilling to provide this information, you might be dealing with a fraud.
4. Beware those who ask for cash payment
Paying contractors in cash is one of the easiest ways to get ripped off because it’s virtually impossible to track. If a contractor requests to be paid this way, don’t do it! Do yourself a favor and stick to credit cards or checks. If you do end up getting ripped off, you’ll have a much easier time tracking the money down and getting reimbursed.
5. Get multiple bids
If you’ve never hired a contractor before, odds are you won’t know exactly what to look for in a scam. If you take the time to obtain a few bids, you can compare them to see if anything looks out of the ordinary. If one of the bids looks too good to be true, it probably is, so use caution!
6. Don’t pay for bids
Reputable contractors do not charge for bids. If a contractor requests money, they are likely scamming you. If you hand them the money for the bid, what’s stopping them from running with the money? With hundreds of contractors offering free bids, why pay for one!
7. Beware those who ask you to pay in full
In the construction industry, deposits are usually required – but this doesn’t mean paying in full! If you give a contractor all of the money up front, they can easily run off. Most legitimate contractors won’t ask you for all of the money up front because they know that isn’t how it works. If your contractor does ask for all of the money, you might be dealing with a fraud.
While there are many scam artists out there, there are also many amazing contractors as well. The best thing you can do is to be aware and smart when it comes to choosing a contractor. If your gut is telling you something doesn’t seem right, trust yourself and don’t be afraid to get a second opinion!