Every week there’s another story—or reality TV episode—about a homeowner getting ripped off by a lazy, incompetent contractor; or worse, a contractor who cashes the homeowner’s deposit but never actually does the work. According to the Federal Trade Commission, home reno fraud is a growing problem in North America, especially with seniors. These cases typically involve door-to-door salespeople who “happen to be doing work in the area,” and sell the naive homeowner on their scam. The stories are disheartening, not just for homeowners but also for the thousands of legitimate, qualified, legal contractors in North America. Luckily, protecting yourself from shoddy work or fraud is easy with a few safeguards.

Step 1: Shop Around
You don’t walk into a store and buy the first TV you see, and the same holds true for contractors. Once you’ve figured out the basic dimensions of your reno, get at least three written, detailed cost estimates. Don’t assume the low-ball is the smartest buy; the cheapest deal isn’t necessarily the best over the long term, especially in the case of home repair. If one contractor’s price is higher than the rest, find out why. Often it’s because all costs are included in the estimate, rather than hitting you with add-ons once the job is underway.

Step 2: Check References
Hiring a contractor is like hiring any employee; they’re working for you, so before committing to pay, check their references. Any legitimate contractor will gladly hand over a half-dozen references because they know they’ll receive praise. If a contractor balks when asked for references, move on. Besides references, ask to see photos of recent work or even visit the jobsite of a current customer. Finally, check with your local Better Business Bureau to see if the contractor has received any grievance complaints.

Step 3: Get it in Writing
You’ve shopped around and are keen to move ahead with the project. But before hammers start swinging and cheques get cashing, draw up a detailed contract that includes everything from cost breakdowns (materials and labour) to start and end dates, and warranty information. For big jobs—home additions, for example—consider hiring a lawyer to do a final check through.

Step 4: Paying Up
The next step is, you guessed it, money. Typically, contractors ask for about 20 per cent up-front and the rest upon completion. If they’re asking for more, this should send up some warning signals. Remember, it’s never too late to move onto another contractor, although it may cost you your initial deposit. The second caveat, no matter how tempting, is to avoid cash deals. Cash deals can leave you unprotected if things go wrong.
Avoiding home renovation scams is easy so long as you follow these basic guidelines. And don’t worry about feeling like you’re annoying the contractor with these issues; the good ones will encourage questions and do their best to answer them fully.

Some useful links:
Canada Mortgage and Housing Corporation, on hiring a contractor

Get it in Writing, a site devoted to hiring contractors

Canadian Better Business Bureau association, and the American equivalent

—Jay Somerset

What is real estate fraud?
Fraud can affect any type of property, whether it’s real estate, monetary investments or items you buy like paintings. There are several types of real estate fraud:

• Stealing title: when the crook changes the ownership or title of your property into his or her name. The crook may intend to sell the property or mortgage it behind your back. In either case, the criminal is fraudulently impersonating you and/or forging your signature.

• Obtaining an illegal mortgage: when the criminal leaves title or ownership in your name, but puts a mortgage on it illegally. Once again, you (and the lender under the mortgage) are the victim of an impersonator and or forger.

• Value fraud: where you are tricked into believing the property is worth considerably more than it is. Remember that there is nothing necessarily illegal about buying low and selling high, unless it involves fraudulent concealment or intentional misrepresentation (such as giving you a forged appraisal or fraudulent comparables).

Why is real estate fraud happening?
Real estate fraud is a continent-wide, if not global, phenomenon. So, there is nothing unique about Canada that is making our properties vulnerable to it.
It is likely related to the upsurge in identity theft, which is reported about regularly in the media. As population centres have grown in North America and people have become more mobile, those involved in the real estate industry (such as sales agents, mortgage brokers, lenders and lawyers) are less likely to know all of their clients on a long-term basis. When towns were small and everyone knew each other, it was pretty difficult to impersonate a local landowner to steal title!

These developments are compounded by the rise of the Internet, which makes obtaining a mortgage loan, for example, more convenient while (to some extent) de-personalizing the process.

*Article courtesy of Titleplus.ca - Now That’s Protection
Chris Paulsen
cpaulsen@homerenovationguide.com