Finding a Contractor: Part 4
The "Home Improvement" Loan Scam
A contractor calls or knocks on your door and offers to install a new roof or remodel your kitchen at a price that sounds reasonable. You tell him you’re interested, but can’t afford it. He tells you it’s no problem — he can arrange financing through a lender he knows. You agree to the project, and the contractor begins work. At some point after the contractor begins, you are asked to sign a lot of papers. The papers may be blank or the lender may rush you to sign before you have time to read what you’ve been given to sign. You sign the papers.
Later, you realize that the papers you signed are a home equity loan. The interest rate, points, and fees seem very high. To make matters worse, the work on your home isn’t done right or hasn’t been completed, and the contractor, who may have been paid by the lender, has little interest in completing the work to your satisfaction.You can protect yourself from inappropriate lending practices. Here’s how.
- Sign any document you haven’t read or any document that has blank spaces to be filled in after you sign.
- Let anyone pressure you into signing any document.
- Deed your property to anyone. First consult an attorney, a knowledgeable family member, or someone else you trust.
Getting a Written Contract
Contract requirements vary by state. Even if your state does not require a written agreement, ask for one. A contract spells out the who, what, where, when and cost of your project. The agreement should be clear, concise and complete. Before you sign a contract, make sure it contains:
- The contractor’s name, address, phone, and license number, if required.
- The payment schedule for the contractor, subcontractors and suppliers.
- An estimated start and completion date.
- The contractor’s obligation to obtain all necessary permits.
- How change orders will be handled. A change order — common on most remodeling jobs — is a written authorization to the contractor to make a change or addition to the work described in the original contract. It could affect the project’s cost and schedule. Remodelers often require payment for change orders before work begins.
- A detailed list of all materials including color, model, size, brand name, and product.
- Warranties covering materials and workmanship. The names and addresses of the parties honoring the warranties — contractor, distributor or manufacturer — must be identified. The length of the warranty period and any limitations also should be spelled out.
- What the contractor will and will not do. For example, is site clean-up and trash hauling included in the price? Ask for a "broom clause." It makes the contractor responsible for all clean-up work, including spills and stains.
- Oral promises also should be added to the written contract.
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