How to Avoid Getting Scammed by a Contractor: Tips and Suggestions

By
Real Estate Broker/Owner with Pasadena Views Real Estate Team, Inc. BRE# 000872112

To be very honest, the reason for writing this post is because I am a victim of an unscrupulous general contractor who is currently licensed by California State Contractor's Board, operates out of Monrovia California and is continuing to take advantage of consumers.

I am hoping that by sharing my story, you will be able to avoid a similar situation and be smarter in making hiring and payment decisions.

My story begins just like most when I was in the process of getting my house ready for sale.  Prior to putting my San Gabriel home on the market and listing it in our Multiple Listing Service (MLS), I wanted to get it painted inside and out, change out some bathroom fixtures, update handles on kitchen drawers and cabinets, change out some light fixtures and do little things here and there to make the house perfect for the new buyers. 

At the same time, I also had an investment property that I was getting ready to rent out that needed to be updated - interior painting, a new air conditioning unit installed, fixtures, etc.

We were also buying a new home in San Marino and needed to have work done there.

This General Contractor who shall remain nameless, but whose name implies that he is in CONTROL, was awarded all three jobs.

Well... this guy was totally OUT of CONTROL! 

  • There was no oversight at all on 2 of the 3 projects he was hired to manage.
  • Unqualified and unlicensed subcontractors were hired.
  • All deadlines were missed.
  • The delays in these projects ended up costing me a tremendous amount of money due to last minute rescheduling of other service providers and loss of work time between my husband and I.
  • The work that was done was incomplete or sub-standard.
  • Charges were ridiculously inflated because the contractor didn't have time or his computer was down or a zillion of other excuses and didn't put the charges for change orders in writing.  Everything was verbal.
  • I learned how to beg and beg and beg and beg....
  • I was totally at the mercy of this guy given the deadlines that needed to be met and the amount of money that was paid in advance for the work to be performed.
  • Come to find out after getting a payment in full from me, this wonderful god-fearing man who attends church on a regular basis decided not to pay his sub-contractors and opened me up to potential Mechanic's Liens.
  • I am getting various phone calls, packages in the mail and people stopping by my house to check if my contractor received his payment from me.
  • Warranty on items like Air Conditioning unit are not honored because the A/C guy didn't get paid.  UGHHHHHHH

How did I pick this jewel of a contractor?  He was a husband of a friend. 

Lesson #1 - Do NOT hire a friend without checking his references fully!

I've been doing some research to see what steps I could have taken to ensure this didn't happen.  So... here's a list I put together that you can use when you're thinking of hiring a contractor.

  1. Hire only licensed contractors and check their status with California Contractors State License Board at                          1-800-321-2752                   or on-line at www.cslb.ca.gov
  2. Get a minimum of three references.  Go out and take a look physically at thier past work.
  3. Get at least three bids.
  4. Get a written contract and don't sign anything until you completely understand the terms.
  5. Never pay more than 10% down or $1,000 whichever is less.
  6. Don't let your payments get ahead of their work.  Keep records of payments.
  7. Don't make a final payment until you're satisfied with the job.
  8. Don't pay cash.
  9. Keep a job file of all papers relating to your project.

To avoid Mechanic's Liens filed against your property, Contractors State License Board suggests the following:

  1. Make sure your contractor hires only licensed subcontractors, and check their licenses, too
  2. Check up on your prime contractors reputation for payment and lawsuits at the local courthouse, suppliers, and subcontractors;
  3. Get a list of all subcontractors, laborers, and materials suppliers to be used by your prime contractor.
  4. The simplest way to prevent liens is to pay with joint checks.
  • Compare the contractor's bill for materials or labor, compare it to the schedule of payments in your contract and the Preliminary 20-Day Notices
  • Make sure that work was done as described
  • Make out the check to both the contractor and the supplier, or subcontractor.
  • Both parties will have to endorse the check, which will ensure that the subcontractors and suppliers get paid.

And, finally:

  1. Before making final payment, make sure that you get a signed conditional release from all possible lien claimants.  You can download a copy of a lien release here.
  2. After you pay, the contractor should get you an unconditional release signed by each of the claimants paid for the portion of the work being released. Make sure that the actual claimant signs the unconditional release.

    By law, you may withhold the next payment until you get the unconditional releases for the previous payment.

  3. File a Notice of Completion with the County Recorder's office after work is completed, you can reduce the amount of time a contractor, subcontractor or supplier has to record a claim.

    This Notice reduces the amount of time a contractor has to record a mechanic's lien from 90 to 60 days, and reduces the time a subcontractor or materials supplier has to record a mechanic's lien from 90 days to 30 days.

    The Notice of Completion form may be obtained through your County Recorder's office or a stationary or office supply store that stock legal forms.

Good luck in hiring a contractor and please follow the steps outlined above to save yourself a lot of aggravation and headaches.

Posted By: Irina Netchaev - Pasadena California Real Estate Agent - Irina Netchaev & Associates.  Irina and her Team of Real Estate experts work in the beautiful Keller Williams Realty in Pasadena California specializing in Pasadena Real Estate, San Marino Real Estate, South Pasadena Real Estate, San Gabriel Real Estate, Altadena Real Estate, Alhambra Real Estate, Monterey Hills Real Estate, Arcadia Real Estate, Sierra Madre Real Estate and surrounding communities.

                                                  (626) 204-3340                             

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Rainmaker
162,886
Lorinda Ward
Keffer Realty - Norfolk, VA
Serving, Hampton Roads Virginia. Norfolk, Chesapeake, Va Beach

I am sorry that this has happened to you and thank you for sharing with us here on AR, the steps we need to take so we can avoid this type of scam.

This is a very helpful post!  Thank you again!

Jul 13, 2008 04:46 PM #45
Rainmaker
276,549
Eric Egeland
RE/MAX SUBURBAN - Libertyville, IL
SFR, e-PRO, CDPE

Great post Irina, thanks for sharing.

You have a lot of great information. Hopefully we can all learn something from this.

Jul 14, 2008 05:48 AM #46
Rainer
16,124
Jim & David Schuelke
Schuelke Plumbing - Los Angeles, CA

Irina - great information here! We wish that everyone understood the implications of having work done to their home or commercial building. Contractors MUST do the right thing at all times to be in integrity and satisfy the laws, as well as the needs of the consumers.

Jul 14, 2008 06:35 AM #47
Rainmaker
185,530
Irina Netchaev
Pasadena Views Real Estate Team, Inc. - Pasadena, CA
Pasadena CA Real Estate

Margaret, excellent point about adequate insurance.  It'll be interesting to see if this guy's insurance carrier drops him.  They just sent me a letter asking for some information since one of the subs filed a claim against him for lack of payment. 

Lorinda & Eric, thanks!

Jim, I couldn't agree more.  I don't understand how some of them get away with this.  As a plumber, I'm sure that this is a sensitive issue since behavior of one affects our perception of others.  Just like in any other industry.  Thanks!

Jul 14, 2008 07:13 AM #48
Rainmaker
251,760
Katrina Madewell
Charles Rutenberg Rlty- More than 5,000 agents(813) 777-1196 - Tampa, FL
Tampa FL Homes for sale | Tampa Bay - (813) 777-1196

Irina - this is fantastic that you can learn from your mistakes and pass this fabulous information along to others in your community and in other communities all over the Unites States.

Katrina Madewell

Jul 14, 2008 09:54 AM #49
Rainmaker
124,734
James Lockard
RE/MAX Properties - Saddle River - Allendale, NJ
Realtor, Allendale, NJ

Doing a couple of projects you learn alot of things along the way.  Two things we now do when hiring a contractor:
1. Make sure you get a copy of his liabilty insurance and workmens compenstaion certificate.
2.  Run a credit report on him or have him provide you one. Some contractors, even legitimate ones will balk at this. Fine, move on to the one who has nothing to hide!

Jul 14, 2008 10:36 AM #50
Rainmaker
185,530
Irina Netchaev
Pasadena Views Real Estate Team, Inc. - Pasadena, CA
Pasadena CA Real Estate

Katrina, long time no talk!  Good to see you here!

James, wow!  Credit report... whan an excellent suggestion!

Jul 14, 2008 10:56 AM #51
Anonymous
Anonymous

Thanks for the post.  As a designer that frequently works with both homeowners and contractors I have also found that a date of completion is also necessary.  The contractor always begins by baulking at this, but once you ask him to move it out in case of delays (that always happen) they will give you a reasonable date.  I have seen homeowners six months past completion dates without a date in the contract and it is a costly clause to miss.

Jul 14, 2008 12:09 PM #52
Rainmaker
185,530
Irina Netchaev
Pasadena Views Real Estate Team, Inc. - Pasadena, CA
Pasadena CA Real Estate

Anonymous, how do you handle the completion date?  Do you ask for a completion date in the contract and attach a penalty if the date is not met?  Or, do you ask for a completion date for the purposes of Mechanic's Lien avoidance?  Thanks!

Jul 14, 2008 03:07 PM #53
Rainmaker
512,581
Lisa Wetzel
RE/MAX Realty Affiliates - Carson City, NV
CDPE, SFR carsonvalleyland.com

Workers Comp and Liability Insurance - make sure they have them and you aren't liable for any of their workers or subs!  Major problem if someone gets hurt on your property and the "builder" isn't properly covered.

Jul 14, 2008 04:07 PM #54
Rainmaker
338,392
Gary Bolen
McCall Realty - South Lake Tahoe, CA
CRS - Lake Tahoe Real Estate Information

great stuff in this one Irina. we've got only one guy up here we trust, and he's the real thing. returns phone calls, comes in on time, doesn't change the bid. what a concept.

hope you've been well.

 

Jul 19, 2008 02:44 PM #55
Rainer
73,981
Sarah Eubanks
Hill Valley Financial Services - Oregon City, OR
Preferred Oregon Loan Consultant & Notary Public

Irina...

Great post.  I may post something similar with respect to checking on Oregon builders.  Would you mind that?  We are in the middle of building a new home.  So, I would love to help others out with avoiding the common pitfalls.  :)

Jul 22, 2008 05:00 AM #56
Rainmaker
185,530
Irina Netchaev
Pasadena Views Real Estate Team, Inc. - Pasadena, CA
Pasadena CA Real Estate

Sarah, of course... feel free to use.  A link back to the original post will be appreciated - http://www.pasadenacarealestatehomes.com/general-contractors-how-to-avoid-getting-scammed-by-one

 

Jul 22, 2008 05:07 AM #57
Rainer
73,981
Sarah Eubanks
Hill Valley Financial Services - Oregon City, OR
Preferred Oregon Loan Consultant & Notary Public

Thanks, Irina.  I will certainly link back.  As you know...it is all about the love!  :)  Have a terrific day!

Jul 22, 2008 06:25 AM #58
Ambassador
988,783
Sharon Paxson
Compass - Newport Beach, CA
Newport Beach Real Estate

Irina - I am sorry about your experience with your contractor, however this is excellent information to provide to someone considering a remodel. A remodel or new construction can cause unbelievable stress. I had a similar experience with someone I would NEVER  use or recommend.

Jul 24, 2008 07:32 AM #59
Rainmaker
338,664
Doris Freeman
RE/MAX REALTY SOURCE - Jackson, TN
Broker/Agent, Realtor, Madison-Gibson-Crockett

Thanks for the post, you gave some relly great advice and tips.

Have A Great Day

Jul 27, 2008 01:59 PM #60
Rainer
22,239
ama hender
Lone Tree, CO

Working with family who squeezes you in is the worst! I also used my brother to finish my basemnt to help him out. I got just what I anticipated... A laundry list of things that still need to be finished - by me. Never again.

Jul 29, 2008 04:21 PM #61
Rainmaker
185,530
Irina Netchaev
Pasadena Views Real Estate Team, Inc. - Pasadena, CA
Pasadena CA Real Estate

Hi Amanda, I feel horrible for you.  Well... it's a lesson learned. 

Doris, you are more than welcome!

Sharon, thanks for commiserating with me.  :-)

Jul 29, 2008 04:34 PM #62
Rainer
14,629
Lucille A. Noble
Weichert Realtors Dunhill Group - Osterville, MA

Thank you for sharing this information.  What a terrible experience, I hope we all learn from it.  Were you talking about laws in California only?  Lucille Noble (Weichert Dunhill Group Real Estate)

Jul 30, 2008 12:34 PM #63
Anonymous
Angelina

Hi!

Very nice article.You shared very helpful tips. Thanks. I would like to share that I found a very reliable source of home remodeling contractors at http://www.channelconstruction.com/

May 07, 2012 10:45 PM #64
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