I get several calls a week from people who feel they have been cheated out of their money in high-dollar home repair matters. They are looking to get their money back or recover damages. In most cases, when they come to me after the deal has gone south, very little can be done.
WHY IS THAT?
- The fraudster has no money or has disappeared.
- The company has gone out of business. Nationally, nearly 1 in 5 businesses go out of business after one year, and nearly half don’t make it to 5 years.
- The individual is operating through a corporation that protects him or her from personal liability.
- Many companies are heavily indebted. When faced with a large judgment, bankruptcy is a get-out-of-jail-free card.
- There are terms in the contract where the consumer has signed away their rights.
- Many consumers do not have the money to pay for litigation which can run into thousands and tens of thousands of dollars.
THE DANGER OF FINANCING
Many times the homeowner does not have the money for a high-dollar project, such as foundation work, a roof, a pool, remodeling, or solar electric panels. The contractor sells the project by offering to finance and then sells the “paper” to a third party. The homeowner is stuck owing the financing company monthly payments for 5, 10, 15, or more years. This obligation is independent of problems that may arise with the contractor.
If you need financing, do not go with the contractors’ offer. It’s fast, it’s easy, which likely means you are paying too much interest. Make arrangements for a home equity loan through a bank, or borrow against your retirement. Consult with a CPA on that one.
PREVENTION
Be skeptical. Think, what if the contractor takes the money and runs? In Texas, there is a law that if a contractor requires more than a $5,000.00 deposit, they must put the money in a Construction Trust Fund, and give you an accounting on how the money is spent. If the contractor does not have such a trust fund, run, don’t walk, away.
For small operators, do not give a contractor more money than the value of the work completed. If it is a $10,000 project, tell them you will give them 1/3 of the money after 1/3 of the work is completed, and so on. If they tell you they need money for supplies, go with them to the hardware store, and pay for the supplies yourself.
Ask for the name and phone number of recommendations. Call them up.
Negotiate, especially with smaller operators. If they want a 50% deposit, offer
25%. Heck, it’s your money.
Get multiple bids. You will be amazed at what people will tell you.
Be patient. Don’t be afraid to walk away from a deal.
If you are contemplating a high-dollar home improvement project, or problems are arising, call The Law Office of Elliott Klein, PLLC. A consultation at a modest fee can save you a world of pain.