Contractor scams are more common than you might think. Recent United States Federal Trade Commission (FTC) data showed more than 81,000 home improvement scams reported in 2024. The consequences aren't cheap — fraud amounts reached $12.5 billion the same year, an increase from 2023.
The best way to protect yourself is to stay vigilant and know the contractor red flags to look out for.
Contractor Scam Warning Signs and Common Tactics
Anyone can fall prey to a home improvement scam, but it's especially common for fraudulent contractors to target older adults. The National Insurance Crime Bureau?(NICB) also reports that more than $9 billion in losses after catastrophic events — like a hurricane, flood or wildfire — are from post-disaster scams.
It's critical to be cautious, even if you don't fall into one of these categories. Watch for these common tactics:
Door-to-Door Offers
Scammers may pose as real contractors who come to your door offering to make repairs, often for much less than the service would typically cost. This may be an attempt to steal an upfront payment or to convince you to finance your project directly with them or a lender they know. In some cases, they might even begin or complete the work, but it will not be done correctly or up to code.
Door-to-door scams can also appear as mailers, flyers or advertisements slipped under your door. Always confirm the contractor's legitimacy before contacting them.
High-Pressure Sales
Avoid contractors who use high-pressure tactics like pushing you to commit to a project that costs more than you can afford or wanting you to sign their contract quickly. Be aware of those who offer to do the job for less than their competitors — “unplanned expenses” are almost certain to arise if the work is completed at all.
Upfront Payment Demands
Reputable contractors won't expect full payment until you're satisfied with the work or the terms of the contract have been fulfilled. Never agree to work with someone who demands upfront payment or only accepts cash. You should also be skeptical of large deposit requirements that exceed other quotes you've received.
Using Leftover Materials
Some contractors may claim that they charge less because they have leftover building materials from previous jobs. A legitimate professional won't typically have leftover materials, as they're careful to only purchase enough supplies to complete their current project to avoid unnecessary waste or expense.
Be wary of anyone who doesn't take the time to assess your project, goals, site conditions and other factors to determine the right materials for your project.
Lack of Licensing or Insurance
Every reputable contractor has up-to-date, verifiable licensing and insurance that protects them and you throughout the duration of work. If a potential contractor doesn't want to or can't provide this information — or if your attempts to verify contractor legitimacy are unsuccessful — move on. Don't accept paper licenses or business cards as legitimate on their own.
Substandard or Incomplete Work
Real professionals want you to love your results and take steps to ensure long-lasting, durable work. If progress is substandard or stalled completely, consider it a contractor red flag. They should also never push tasks off on you, like contacting the city about building permits or cleaning up their site.
If your current contractor doesn't communicate with you or disappears for days or weeks at a time, or is always unavailable to talk, it may be time to escalate the issue or terminate your agreement.
Essential Steps to Protect Yourself When Hiring a Contractor
With so many scams in the home improvement industry, how can you protect yourself while still finding the best contractor for your budget? These six tips can help:
1. Research and Compare Contractors
Consulting multiple contractors is a great way to compare costs and services. It also provides the essential information you can use to judge other, potentially fraudulent offers. If one contractor offers to take on your project for significantly less or more than the others, consider it a red flag unless they can provide a legitimate explanation for the discrepancy.
Once you've found a contractor you're considering, take the following steps before hiring them:
- Read third-party reviews: Many contractors have reviews from satisfied clients on their websites, but keep in mind that they control which reviews they publish. Consult third-party review sites like Angi or Yelp. The Business Consumer Alliance (BCA)'s Business Reputation Reports are a good place to start your research.
- Ask for references: Ask the contractor for a list of previous clients, then follow up on each reference. Make sure these references are relevant to the work you need done. You should also ask about their relationship to the contractor, as friends or family are less likely to provide honest feedback.
- Check for complaints: Search for your contractor's name online using keywords like “scam," “issues," or “complaints.” If nothing appears, contact your local Home Builders Association or state consumer protection agency to see if the contractor's name is on any potential fraud lists.
2. Ask if They Use Subcontractors
Some contractors hire subcontractors to complete some or all of a project. You should avoid this option unless you're working with a reputable business that vets each one. Otherwise, you may be on the line for paying those subcontractors or other legal ramifications if the person who hired them turns out to be fraudulent. If subcontractors are unavoidable, make sure they're included in the contract and covered by the primary contractor's insurance policy.
3. Verify Licensing and Insurance
It's not enough for a contractor to claim they're licensed and insured — confirming it yourself is the only way to be sure. Ask for their insurance policy number and contact the appropriate underwriter to verify that their coverage is legitimate and up to date. You can verify their contractor's license through your state's Department of Consumer Affairs or by contacting municipality officials in the county where the contractor is licensed.
4. Know Your Rights
Several states have specific laws regarding contractor deposits and contracts. For example, in California, your down payment can't legally exceed 10 of the total project cost or $1,000, depending on which is higher. This is true even if the contractor needs to order special materials to complete the job. Review your state's laws before reviewing a contract so you know what you're entitled to.
5. Stay Informed About New Scams
New scams are always emerging, and even door-to-door fraudsters can refine their tactics once people have become aware of their old routine. Staying informed about new and trending cons can help you know what to look for. This is especially important in the age of artificial intelligence (AI). Fake websites and convincing voice cloning make it harder than ever to distinguish between reality and fraud.
Organizations like the BCA share scam alerts to help you stay aware. You can even search by keyword, like “contractor” or “home improvement."
If you've been contacted by a door-to-door scammer, let your neighbors know what you experienced. Consider sharing information about contractor fraud prevention with those in your neighborhood who might be targeted after severe weather, such as older adults.
6. Take Before Photos of Your Property
Before your contractor starts making renovations, take pictures of the area where they will be working so you have evidence of your property's condition in case you need to dispute a contract or file an insurance claim. For example, if you're adding a new room to your home, photograph the side of the house where the addition will go as well as the ground, landscaping and any nearby structures like sheds, trees, electric poles, utility meters or fences.
The Importance of a Written Contract
Never agree to work with a contractor without a written contract, even if it's an acquaintance or someone who claims to be trustworthy. Signed contracts establish clear expectations and guidelines that facilitate a successful project and can hold the contractor accountable if they fail to uphold their end. In some states, home improvement projects costing a certain amount are legally required to have a contract.
If something is unclear, ask for clarification. Legitimate contractors want each project to go smoothly and for you to be happy with the results. It's also OK to request your contract in the language you're most comfortable reading. If something isn't in the contract that should be — or you don't agree with the terms as they're presented — ask for adjustments before agreeing to sign. If you or the contractor wants to change the contract after work has started, only do so through a formal Change Order amendment.
What to Look for in a Home Improvement Contract
Review each part of the proposed contract before signing anything. Confirm it includes the following:
- The contractor's name, address and contact information
- Their license number and the counties or states in which they are licensed to complete work
- A start date and an estimated date of completion
- A list of which stylistic decisions the contractor is permitted to make and which require your approval
- The contractor's insurance information, including the policy number and an overview of coverage
- Information about subcontractors, if applicable, including details of their agreements with the primary contractor
- Contingency plans for issues like running out of materials, inclement weather or accidental property damage during construction
- All financial information, including the deposit amount and due date, a list of required materials and their costs, and a payment schedule and repayment interest rates, if applicable
- A detailed explanation of the project scope and plan, including a list of all tasks the contractor agrees to complete
- Details about workflow, such as start and end times for loud construction and how to contact them with time-sensitive questions
- Confirmation that the contractor has secured the appropriate permits and approvals before beginning any work
- Warranty information on both the materials and the work itself, and what steps to take if you're unhappy with the final product
- Terms, instructions and any financial obligations associated with early contract termination
- The contractor's agreement to dispose of all materials and the extent of cleanup after completion
Each copy of the contract should have both your and the contractor's signatures and the date it was signed. Make sure you have a copy to keep for your files.
What to Do if You Suspect a Scam
If you think your current contractor has scammed you, do not give them any more money. Follow these steps:
- Document everything: Document every interaction and agreement with your contractor. This includes sending follow-up letters and requesting confirmation of receipt via certified mail after phone calls.
- Contact local consumer protection agencies: Let your local consumer protection groups know about your experience. You can find the contact information for your state's agency on the U.S. General Services Administration's website.
- File a report with the authorities: Contact your local authorities with any evidence of the scam so they can help you navigate your next steps and let the public know what to look out for.
Not all issues that arise during a project signify a scam — even contractors can make mistakes. That's why it's important to have a thorough, written contract that establishes guidelines for possible contingencies. In most cases, issues can be easily addressed with an open conversation. Professional mediation organizations can shoulder the burden for you by resolving issues directly with the contractor.
How Business Consumer Alliance Helps Protect Homeowners
BCA is a nonprofit organization on a mission to connect homeowners with reputable contractors. Our Contractor Match program is free and gives you one less thing to worry about. Just tell us about your project, and we'll curate a list of highly qualified offers from licensed contractors with the skills you need. After that, simply choose the one that aligns with your budget and vision.
We also publish Reputation Reports for millions of businesses and contractors in the United States to help consumers explore business history, reviews and complaints in one place.
Find Trustworthy Contractors With Help From BCA
When preparing for a home renovation project, the last thing you want is to choose a fraudulent contractor. With scams becoming more sophisticated and harder to spot, it's more important than ever to vet your options carefully.
BCA is here to help. Our free matchmaking services connect you with legitimate contractors in California who are eager to complete your project. Submit your request and project details today to get started.
Having issues with your current contractor? We can help with that, too. Explore our mediation and resolution services, request legal advice from our expert team, or visit the BCA blog to stay informed about the latest consumer scams.