Home Improvement Facts
Whether youíre planning an addition for a growing family or
simply getting new storm windows, finding a competent and reliable contractor is
the first step to a successful and satisfying home improvement project.
Your home may be your most valuable financial asset. Thatís
why itís important to be cautious when you hire someone to work on it. Home
improvement and repair and maintenance contractors often advertise in
newspapers, the Yellow Pages, and on the radio and TV. However, donít consider
an ad an indication of the quality of a contractorís work. Your best bet is a
reality check from those in the know: friends, neighbors, or co-workers who have
had improvement work done. Get written estimates from several firms. Ask for
explanations for price variations. Donít automatically choose the lowest bidder.
Home Improvement Professionals
Depending on the size and complexity of your project, you
may choose to work with a number of different professionals:
- General Contractors manage all aspects of your project, including hiring
and supervising subcontractors, getting building permits, and scheduling
inspections. They also work with architects and designers.
- Specialty Contractors install particular products, such as cabinets and
- Architects design homes, additions, and major renovations. If your
project includes structural changes, you may want to hire an architect who
specializes in home remodeling.
- Designers have expertise in specific areas of the home, such as kitchens
- Design/Build Contractors provide one-stop service. They see your project
through from start to finish. Some firms have architects on staff; others
use certified designers.
Donít Get Nailed
Not all contractors operate within the law. Here are some
tip-offs to potential rip-offs. A less than reputable contractor:
- solicits door-to-door;
- offers you discounts for finding other customers;
- just happens to have materials left over from a previous job;
- only accepts cash payments;
- asks you to get the required building permits;
- does not list a business number in the local telephone directory;
- tells you your job will be a "demonstration;"
- pressures you for an immediate decision;
- offers exceptionally long guarantees;
- asks you to pay for the entire job up-front;
- suggests that you borrow money from a lender the contractor knows. If
youíre not careful, you could lose your home through a home improvement loan
Hiring a Contractor
Interview each contractor youíre considering. Here are some
questions to ask.
- How long have you been in business? Look for a well-established
company and check it out with consumer protection officials. They can tell
you if there are unresolved consumer complaints on file. One caveat: No
record of complaints against a particular contractor doesnít necessarily
mean no previous consumer problems. It may be that problems exist, but have
not yet been reported, or that the contractor is doing business under
several different names.
- Are you licensed and registered with the state? While most
states license electrical and plumbing contractors, only 36 states have some
type of licensing and registration statutes affecting contractors,
remodelers, and/or specialty contractors. The licensing can range from
simple registration to a detailed qualification process. Also, the licensing
requirements in one locality may be different from the requirements in the
rest of the state. Check with your local building department or consumer
protection agency to find out about licensing requirements in your area. If
your state has licensing laws, ask to see the contractorís license. Make
sure itís current.
- How many projects like mine have you completed in the last year?
Ask for a list. This will help you determine how familiar the contractor is
with your type of project.
- Will my project require a permit? Most states and localities
require permits for building projects, even for simple jobs like decks. A
competent contractor will get all the necessary permits before starting work
on your project. Be suspicious if the contractor asks you to get the
permit(s). It could mean that the contractor is not licensed or registered,
as required by your state or locality.
- May I have a list of references? The contractor should be able
to give you the names, addresses, and phone numbers of at least three
clients who have projects similar to yours. Ask each how long ago the
project was completed and if you can see it. Also, tell the contractor that
youíd like to visit jobs in progress.
- Will you be using subcontractors on this project? If yes, ask
to meet them, and make sure they have current insurance coverage and
licenses, if required. Also ask them if they were paid on time by this
contractor. A "mechanicís lien" could be placed on your home if your
contractor fails to pay the subcontractors and suppliers on your project.
That means the subcontractors and suppliers could go to court to force you
to sell your home to satisfy their unpaid bills from your project. Protect
yourself by asking the contractor, and every subcontractor and supplier, for
a lien release or lien waiver.
- What types of insurance do you carry? Contractors should have
personal liability, workerís compensation, and property damage coverage. Ask
for copies of insurance certificates, and make sure theyíre current. Avoid
doing business with contractors who donít carry the appropriate insurance.
Otherwise, youíll be held liable for any injuries and damages that occur
during the project.
Talk with some of the remodelerís former customers. They can
help you decide if a particular contractor is right for you. You may want to
- Can I visit your home to see the completed job?
- Were you satisfied with the project? Was it completed on time?
- Did the contractor keep you informed about the status of the project,
and any problems along the way?
- Were there unexpected costs? If so, what were they?
- Did workers show up on time? Did they clean up after finishing the job?
- Would you recommend the contractor?
- Would you use the contractor again?
Understanding Your Payment Options
You have several payment options for most home improvement and maintenance and
repair projects. For example, you can get your own loan or ask the contractor to
arrange financing for larger projects. For smaller projects, you may want to pay
by check or credit card. Avoid paying cash. Whatever option you choose, be sure
you have a reasonable payment schedule and a fair interest rate. Here are some
- Try to limit your down payment. Some state laws limit the amount of
money a contractor can request as a down payment. Contact your state or
local consumer agency to find out what the law is in your area.
- Try to make payments during the project contingent upon completion of a
defined amount of work. This way, if the work is not proceeding according to
schedule, the payments also are delayed.
- Donít make the final payment or sign an affidavit of final release until
you are satisfied with the work and know that the subcontractors and
suppliers have been paid. Lien laws in your state may allow subcontractors
and/or suppliers to file a mechanicís lien against your home to satisfy
their unpaid bills. Contact your local consumer agency for an explanation of
lien laws where you live.
- Some state or local laws limit the amount by which the final bill can
exceed the estimate, unless you have approved the increase. Check with your
local consumer agency.
- If you have a problem with merchandise or services that you charged to a
credit card, and you have made a good faith effort to work out the problem
with the seller, you have the right to withhold from the card issuer payment
for the merchandise or services. You can withhold payment up to the amount
of credit outstanding for the purchase, plus any finance or related charges.
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 youíre
interested, but canít afford it. He tells you itís no problem ó 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 youíve 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 isnít done right or hasnít 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. Hereís how.
- Agree to a home equity loan if you donít have enough money to make the
- Sign any document you havenít 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.
- Agree to financing through your contractor without shopping around and
comparing loan terms.
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 contractorís name, address, phone, and license number, if required.
- The payment schedule for the contractor, subcontractors and suppliers.
- An estimated start and completion date.
- The contractorís obligation to obtain all necessary permits.
- How change orders will be handled. A change order ó common on most
remodeling jobs ó 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 projectís 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 ó contractor, distributor or
manufacturer ó 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
- Oral promises also should be added to the written contract.
- A written statement of your right to cancel the contract within three
business days if you signed it in your home or at a location other than the
sellerís permanent place of business. During the sales transaction, the
salesperson (contractor) must give you two copies of a cancellation form
(one to keep and one to send back to the company) and a copy of your
contract or receipt. The contract or receipt must be dated, show the name
and address of the seller, and explain your right to cancel.
Keep all paperwork related to your project in one place. This includes copies of
the contract, change orders and correspondence with your home improvement
professionals. Keep a log or journal of all phone calls, conversations and
activities. You also might want to take photographs as the job progresses. These
records are especially important if you have problems with your project ó during
or after construction.
Completing the Job: A Checklist
Before you sign off and make the final payment, use this checklist to make sure
the job is complete. Check that:
- All work meets the standards spelled out in the contract.
- You have written warranties for materials and workmanship.
- You have proof that all subcontractors and suppliers have been paid.
- The job site has been cleaned up and cleared of excess materials, tools
- You have inspected and approved the completed work.
Where to Complain
If you have a problem with your home improvement project, first try to resolve
it with the contractor. Many disputes can be resolved at this level. Follow any
phone conversations with a letter you send by certified mail. Request a return
receipt. Thatís your proof that the company received your letter. Keep a copy
for your files.
If you canít get satisfaction, consider contacting the
following organizations for further information and help:
- State and local consumer protection offices.
- Your state or local Builders Association and/or Remodelors Council.
- Your local Better Business Bureau.
- Action line and consumer reporters. Check with your local newspaper, TV,
and radio stations for contacts.
- Local dispute resolution programs.
For More Information
ē Federal Trade Commission:
ē National Association of Home Builders Remodelorsô
To order a free copy of How to Find a Professional
Remodeler, send a self-addressed stamped envelope to:
NAHB Remodelors Council
1201 15th Street, NW
Washington, DC 20005
ē National Association of Consumer Agency
1010 Vermont Avenue, NW
Washington, DC 20005
The FTC works for the consumer to prevent fraudulent,
deceptive and unfair business practices in the marketplace and to provide
information to help consumers spot, stop and avoid them. To file a
complaint or to get
information on consumer issues, visit
www.ftc.gov or call
toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters
Internet, telemarketing, identity theft and other fraud-related complaints into
Consumer Sentinel, a secure, online database available to hundreds of civil
and criminal law enforcement agencies in the U.S. and abroad.