Selecting a Contractor for your Remodeling Project - PART II

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 you’re interested, but can’t afford it. He tells you it’s no problem — 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 you’ve 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 isn’t done right or hasn’t 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. Here’s how.

• Agree to a home equity loan if you don’t have enough money to make the monthly payments.
• Sign any document you haven’t 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 contractor’s name, address, phone, and license number, if required.
• The payment schedule for the contractor, subcontractors and suppliers.
• An estimated start and completion date.
• The contractor’s obligation to obtain all necessary permits.

How change orders will be handled

A change order — common on most remodelling jobs — 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 project’s cost and schedule. A remodel contractor 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 — contractor, distributor or manufacturer — 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 stains.
• 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 seller’s 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.

Keeping Records:

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 — 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 and equipment.
• 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. That’s your proof that the company received your letter. Keep a copy for your files.

If you can’t get satisfaction, consider contacting the following organizations for further information and help:

• State (provincial) and local consumer protection offices.
• Your state or local Builders Association and/or Remodelor's 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.

The preceding home improvement article was contributed by Renovation Headquarters, owned and operated by Bill Prudehome. With more than 25 years in senior positions in the construction industry, Bill has been providing home renovation, home remodel and repair services to individuals and small business throughout North America.

Katherin7 at 5:58am September 18

Thanks for very useful information. All these things are very important to know before selecting a contractor or signing papers. Home equity loan is a very serious type of loan because thi risk is very high - you may loose your home in case you will fail to pay back. That's why it's important to read all the documents before you sign and make sure that you are offered really a good deal. By the way, if contractor or lender are rushing you - better look for other ones, no one can rush you to take so important decision which can cost you money or, furthermore, your home. It's worth to before very attentive before taking out loans or advance cash loans and consider all the pros and coins before applying.