Outstanding Post! 

Always, Always, (Alright, I'll say it again) ALWAYS, have an inspection prior to moving onto the next phase, if the contractor does NOT have the $$ for the materials, move onto another contractor.

I agree 100%!!!

Jim

Ken: My friend's inlaws paid the contractor upfront for a large job ($80K) despite all the warnings from the family. Of course, they had to take the contractor to court. Common sense is not as common as we think even when people are forewarned. 

Ken,

I like rule number one...except the word 'never'...almost never...what about lender application fees and appraisers?  Thanks,   Fran

People seem to get swindled out of their money every day...no matter how many warnings! Some of thee guys are such smooth talkers!

I recommend that folks check with the State's Attorney's office and the state consumer protection office too.  If there are significant complaints, there is a reason.

Good article. These home improvement companies have caused a lot of grief for a lot of home owners over the years.

Folks also need to make sure that the companies get required permits. 

Jim - man I am not about to argue with you on those points! Welcome to AR.

Tara - oops. Case in point there! Thanks.

Fran - I hear your point, I believe, and I can only speak from my standpoint on this and say we don't charge any upfront fees but I know a lot of our competitors do - especially the banks. As far as the appraiser I would say this, many appraisers do the work before they get paid but deliver the appraisal only after being paid which, IMHO, is fair BECAUSE borrowers may think they are paying for a specific value but they are actually paying for the work - thus the reason the GSE's are going to be requiring completely separate appraisal orders to even further move valuations away from client and originator influence. It's a good point but a bit different than a contractor asking from $50,000 advance - appraisals are generally not over $500 on SFRs under $500k. Good question, though.

Joan - they can make people feel like they don't have any choice. Funny thing is they don't hesitate to lien the property when payment is delayed!

Lenn - VERY good point about the permits. I have stopped crews when I didn't see a permit posted on my own jobs. Here in my city the permit MUST be posted according to specific guidelines and none of those include INSIDE of the property. I bet if you call your municipality almost everything except paint and carpet requires a permit.

Thank you ALL for your comments.

There isn't much that is more difficult than trying to get money back after the contractor has it and hasn't done the job or done it right.  They react much better when they are still waiting to get paid. 

You deserve a gold star! THIS is a great point!!  Sometimes we think that because WE KNOW how this all works - everyone else does too!  Guess I hadn't thought about the fact that not everybody knows how construction/rehab loans work.  THANKS!

Ken - excellent post. I have had my own experience with contractors and writing their "management" check once a week even though the "manager" was rarely there . . .

It is a leap  of faith when you hire someone to complete a job for you.

Sharon - that's why we love our rehab loan. Some people actually expect to walk away from the closing table with control of $30k $75k or even $500k to have rehab done. Uhm, how about NOT? We cause the work to be completed prior to disbursement and people think we're hard to deal with. Uhm okay.