Don't Get Scammed

“Don’t Get Scammed: Do Your Due Diligence”

When storms blow in, fly-by-night scam artists often follow. We need to watch out for scammers so they won’t have a chance to take advantage of the misfortune of homeowners. The US general in Iowa, the Department of Homeland Security, and the Federal Emergency Management Agency (FEMA) have some important topics for us to talk about.

Severe weather such as tornadoes, hail, or flooding is often exploited by people knocking at your door. They have persuasive flyers, promising everything in the world. They play on your emotions, because when you see damage on your house, you will want to get it fixed immediately. They don’t want you to spend time thinking about doing due diligence on the contractor you’re hiring. They want you to sign a contract full of fine print without reading it just so they can get your money. Don’t fall for scammers. Instead, do your due diligence by asking these important questions.

Do you have a clearly defined contract?

Get a written estimate first, and compare services and prices before making a final decision. Before signing a contract, read the fine print. There is a reason they hide fine print on the bottom of the contract. They want you to skim right over it. There are often small clauses in the fine print that might not be in your best interest. You need to read over the entire contract carefully to make sure that’s not the case. Remember, once you’ve signed the contract, you’ve committed yourself to the terms.

Does the contractor have good references?

No matter what, always check the contractor’s references. It doesn’t matter if you think you know them fairly well. Four references are adequate—you don’t need a book full of references. If you are still uneasy, you can check more than four. My stance is, if things seem suspicious and raise the hair on the back of your neck, trust your intuition and hire somebody else.

Are they a licensed contractor? Do I trust them enough to give a deposit?

Make sure the contractor is licensed to work in your state. In the old days, contractors didn’t collect money up front. Now, we have to ask for a deposit, because we are carrying most of the risk. We could finish the whole job and something unexpected happens, preventing the homeowner from paying the costs. Therefore, if you feel comfortable with the contractor, you trust them, and you have done proper due diligence, it is perfectly reasonable to give a deposit. Don’t give the full amount before work has even begun, but a third of the money is acceptable.

Does the contractor have any insurance?

Ask for proof of insurance. This is very important, and it’s something I stress when I visit a homeowner. We always hand the homeowner a packet of information containing our insurance carrier’s phone number. Contractors should have general liability insurance, and if they are bringing people to your property, they should have workman’s comp. If any accidental damage to your home were to occur, who would be responsible?

That is what general liability insurance is for. Your homeowner’s insurance policy should never be tested by a contractor because they didn’t have the proper insurance. The minimum required coverage in the state of Iowa is $50,000. This wouldn’t even begin to cover large amounts of damage. That’s why I tell homeowners that contractors should have $1 million in liability insurance. We carry $3 million at Bakeris Roofing.

Workman’s comp is also very important. If everyone that visited your home was an owner of the business, they wouldn’t technically need to take workman’s comp out on themselves. However, all employees should have workman’s comp. don’t take my word for it, contact a workman’s comp attorney, your own attorney, or your insurance company. You never want to become the one responsible because your general contractor didn’t have proper insurance. I’ve spoken with workman’s comp attorneys who told me that homeowners typically pay around $5,000 out-of-pocket when a worker gets injured and they don’t have workman’s comp. Their attorneys will have them pursue the homeowner and their homeowner’s insurance policy to cover the costs of their injury.

Ultimately, it all comes down to doing your due diligence on a company before letting them do work on your home.