Avoiding Construction and Home Improvement Scams

Older citizens are particularly vulnerable to construction scams because so many own their own homes but cannot do their own repairs.  Plus, they are often very trusting and sometimes they are easily intimidated.  Your home is likely one of your most valuable financial assets so be extra careful when you hire someone to work on it.

Tip-Offs to Potential Rip-Offs

Not all contractors operate within the law. Unlicensed contractors often target older citizens and that is a crime.

Here are some warning signs. Watch out for scams or an unlicensed contractor who:

• Solicits door-to-door
• Just happens to have materials left over from a previous job
• Pressures you into making an immediate decision
• Asks you to pay for the entire job up-front
• Only accepts cash payments
• Asks you to obtain required building permits
• Doesn't list a business number in the local phone book

Tips for Hiring a Contractor

• Deal with a licensed contractor who meets state requirements for expertise and performance. In some states, by hiring a licensed contractor, you make yourself eligible for monetary relief from special funds in case of improper and dishonest conduct.
• Ask friends and neighbors for contractor referrals.
• An advertisement in the Yellow Pages or on TV isn´t necessarily a good indication of the quality of a contractor´s work.
• Get written estimates from several contractors.
• Don´t automatically choose the lowest bidder – ask for explanations on price variations among proposals.
• Insist on a detailed contract, including agreed-upon start and finish dates.
• Licensed contractors are required by law to provide a contract for residential work. Don´t rely on verbal agreements – get all guarantees, warranties, and promises in writing.
• Don´t pay 100% of the bill until the work is 100% complete.
• Try to limit your down payment – a reputable contractor should be able to front the costs of supplies without a large sum of money from you. A deposit of about one-third (30%) of the total cost is a good rule of thumb.
• Make payments during the project contingent upon completion of certain tasks. That way, if the contractor is behind schedule your payments are delayed until the work is actually done and the contractor will be much more inclined to get the job moving if payments are only made upon completion of specific tasks.
  

Avoiding Rogue Movers

Rogue movers typically work like this: Without ever visiting your home or seeing the goods you want moved, they give a low-ball estimate over the phone or Internet. Once your goods are on their truck, they demand more money before they'll deliver or unload them. They hold your goods hostage and force you to pay more—sometimes much more than you thought you had agreed to—if you want your possessions back.

Your best defense is to recognize a rogue mover before they have your goods. Here are the "red flags" to look out for.

 How Reverse Mortgage Lenders Put Older Homeowners at Risk

Certainly, the continuing availability of reverse mortgages is good news for seniors who need to cash out some of their housing wealth to supplement Social Security, to meet unexpected medical costs, or to make needed home repairs. But growth in the reverse mortgage market has unleashed other, more malignant forces.

With reverse mortgages continuing to grow despite the economic downturn (volume more than doubling between 2005 and 2008), predators who once reaped profits from exotic loans have now focused on wresting more wealth from vulnerable seniors. And securitization, which allowed sub-prime originators to disassociate themselves from the downside risks of abusive lending, is becoming commonplace in the reverse mortgage industry.

This report (28 pg PDF), “How Reverse Mortgage Lenders Put Older Homeowners at Risk” is an excellent analysis of the industry, its players, how reverse mortgages work and the dangers to consumers from certain lender practices.

Source: The National Consumer Law Center

 How to Protect Yourself from Home Improvement and Equity Fraud

Many senior citizens have spent years building equity into their homes. Unfortunately, scam artists have developed home improvement and home equity schemes targeted at separating unsuspecting seniors from their most valuable asset—their homes. This report provides some important tips on “How to Protect Yourself from Home Improvement and Equity Fraud.” (2 pg, PDF from the Better Business Bureau)

Do Not Let Predators Take Your Home

Predatory lending often starts with a telephone call, mailing, or e-mail, television commercial, or a knock at your door. The home improvement scam is one of the many tactics predatory lenders will use to convince you to take out a home loan. Other predatory lending scams include offers of debt consolidation, mortgage refinancing, and the promise of extra cash.

 What is Predatory Lending?

In general terms, predatory lending is a process, often starting with misleading sales tactics, that results in the origination of a loan to a borrower who ends up paying too much in fees, interest, and/or insurance.

Lenders typically make these overpriced loans based on the equity the borrower has built up in his or her home, rather than on the ability to repay the obligation.

Often borrowers do not fully understand or are not made aware of all the terms of the loan. Older borrowers often fall victim to unscrupulous lending scams out of need to secure funds for needed home repairs. Many borrowers do not have the financial capacity to repay the loan, and are at risk of losing their homes.

Examples of predatory lending practices include:

• Adding hidden costs and expensive extras into the cost of the loan
• Charging inflated interest and fees regardless of credit history
• Repeating refinancing or “flipping” the loan
• Falsifying the borrower’s income
• Forging signatures on loan documents

If you decide to take out a loan, talk to a reputable attorney, financial counselor, or trusted person BEFORE you sign or agree to anything.

This document, “Do Not Let Predators Take Your Home: Know the Basic Facts about Home Equity Fraud” provides good, concise information that you can use. (12 pg, PDF)

(NOTE: It was created for people in New York City area, so the contacts are specific to that area, but the primary information is very good.)