Avoid home-improvement scams

Jan 27, 2008 at 2:31 p.m. ET

Every home needs repairs and improvements, but the current mortgage crisis, recent wildfires and harsh weather conditions have homeowners across the country thinking about improving the condition and value of their home.

Home Contractor

Check building codes

Whether it is refurbishing a kitchen or putting on a new roof, each state has a regulatory body that enforces codes by which all contractors must abide. A good contractor will be able to manage that bureaucratic minefield from the beginning.

Check contractor's credentials and licenses

Each contractor is certified in their county. If a potential hire fails to provide these credentials -- it's a red flag. On that same note, every contractor, from window installers to plumbers, must be licensed to contract.

Conduct your own background check

Each state's regulatory body keeps track of all complaints as well as each individual community Better Business Bureau. Make sure your contractors are square the local BBB.

Don't pay more than 10 percent up front

State laws actually prohibit contractors from accepting pre-paid fees of more than 10 percent of the estimate's price. If the contractor insists on more for tools, materials and wages, consider it another red flag.

Top 10 tips for avoiding home-improvement scams:

  1. Hire a licensed contractor.
  2. Verify the contractor's license with your state's Contractors State License Board
  3. Receive at least three written estimates before choosing a contractor.
  4. Prior to hiring a contractor, check at least three references of previous work completed.
  5. Make sure your agreement is in writing and you understand the terms.
  6. Maximum down payment of 10 percent or $1,000.00, whichever is less, with the exception of pools. Never pay more.
  7. Pay for work as it's completed, don't let payments get ahead of the work.
  8. Don't make payments with cash.
  9. Keep a project file with all documents relating to your project, including a payment record.
  10. Don't make your final payment until you are satisfied with the work completed.

List provided by Construction Referral, Inc.