The Top 5 Contractor Scams and How to Avoid Them

The job is already under way, perhaps even complete, when this one hits. Suddenly your contractor informs you that the agreed-upon price has skyrocketed. He blames the discovery of structural problems, like a missing beam or termite damage, or design changes that you made after the job began.

The additional fees might very well be legit, but some unscrupulous contractors bid jobs low to get the work and then find excuses to jack up the price later. If you’re unsure whether your contractor is telling the truth about structural problems, you can get an impartial opinion from a home inspector, the local branch of the National Association of Home Builders, or even your local building department.

How to protect yourself: Before signing the contract, make sure it includes a procedure for change orders—mini-contracts containing a work description and a fixed price—for anything that gets added to the job in progress. The extra work, whether it’s related to unforeseen building issues or homeowner whims, can proceed only after the change order is signed by both homeowner and contractor.

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We can’t comment on the specifics of your contract; each state has its own construction contract statutes. A contract should clearly define all project plans and specifications. Overcharges shouldn’t be a surprise. Most often, they result from change orders -- changes you make in the field -- that you should have OK'd beforehand. Often, your authorization comes verbally, as in, "Sure, do it." However, it's always better to agree to changes in writing, so you know how much they’ll cost. Check your contract to see how it covers over-budget items. Often, unforeseen things happens during a renovation, especially concerning electrical and plumbing problems behind a wall. Generally, you should have an explanation and receipt for those extras. If you think the contractor is being unfair, have a conversation with him. Most times, you can work it out. Your contractor wants your recommendation, and should be willing to explain charges to your satisfaction or, perhaps, eat some overages you never agreed to. Rule-of-thumb: Hold back the last 10% of payment until you are perfectly satisfied with the job and bill. More info on contractor contracts: http://www.houselogic.com/home-advice/contracting/what-remodeling-contract-should-say/
Posted by HouseLogic on February 15, 2013

I am almost done with my kitchen remodel but I got an extra bill with some added costs - additional pluming/electrical (over the allowance) and additional painting charges for the walls and windows in back area of my kitchen that is about 3x5 feet (really the back walls of my kitchen that is on the other side of my kitchen nook. I shouldn't be surprised by extra fees, correct? My contract says all interior walls ceilings and moldings. And that any adjustments will be accompanied by receipts, amended proposal or invoice. I think the bill is my "amended invoice". Can I get your opinion on that? Is he padding the bill?
Posted by Homeowner on February 12, 2013

My point was, which is definitively true, is that if the argument is over what is included in a contract, a judge is bound by the four corners of that contract. Period. Actually, I should have wrote that second sentance a little different. "Anything AFTER the signature is void in a court" should read "Anything AFTER the signature may be void in court". It obviously depends on what the judge will/will not allow. Now, arguments may be made for what is/isn't included, but that is what the last empty page in my example tries to fix. What I was addressing was intent of both parties to include something in a contract. "If text appears after the signature in a contract, but it’s reasonably clear from the context that it’s intended to express and be a part of the agreement, a court may treat it as such." This is correct, a court may (or may not) treat it as such. Again, it is up to that particular judge what they will/will not allow and people can have different versions of what is considered resonably clear and if the case is about what is, or isn't in the contract, that is what I have attempted to clear up. I never stated that this was the end all, be all solution. I just stated what I do with my contracts now and then gave an example of how I do it. This method does tend to clear up any arguments of what is actually supposed to be included. I whole-heartedly agree (if there is any confusion with a contract) with this - "It’s best to contact an attorney to review contracts and make changes as every situation is different."
Posted by Raymond on December 20, 2012

This may not be definitively true. Context and presentation matter with contracts. If text appears after the signature in a contract, but it’s reasonably clear from the context that it’s intended to express and be a part of the agreement, a court may treat it as such. It’s best to contact an attorney to review contracts and make changes as every situation is different.
Posted by HouseLogic on December 14, 2012

I would like to add something about contracts that wasn't really clear in the article. Anything AFTER the signature is void in a court. I have known judges that will not allow any modification to the contract after the signature because they (the judge) are bound by what is in the contract for their ruling. If it is not included in the agreement, it can not be honored. How do you know if it is actually included? It can not be a "second sheet of paper stapled to the back", it can not be "handwritten scribbles below the signature". Now whenever I draw up a contract, I have IN the contract, a blank piece of paper for additions/modifications. Example, a two page contract would have the what is expected on the first page (page one of two) and a second page (page two of two) that, at the top of the page, is written, "This page intentionally left blank for additions/modifications", and then the signatures, dates, etc. are at the BOTTOM of the SECOND page. That way if anything has to be added, it is added ABOVE the signatures. Of course when something is added it must be stated that it is an addition to (or modification of) the original contract and must be signed or initialed and dated by all parties involved. I hope this helps to clarify the contract issue a little bit.
Posted by Raymond on December 13, 2012

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