Contractor and Home Repair Scams: Protecting Your Property

Contractor scams cost homeowners billions annually through shoddy work, inflated prices, abandoned projects, and outright fraud. These scams spike after natural disasters when demand overwhelms the supply of legitimate contractors, but they operate year-round, targeting homeowners unfamiliar with construction costs and practices. The National Association of State Contractors Licensing Agencies reports that unlicensed contracting accounts for the majority of home repair fraud.

Common Contractor Scam Types

Door-to-door scams. A worker appears at your door claiming they noticed roof damage, foundation issues, or tree hazards while “working in the neighborhood.” They offer an immediate, discounted repair using “leftover materials.” The work is unnecessary, superficial, or damaging, and the “discount” is above market rate.

Storm chaser fraud. After storms, uninsured and unlicensed contractors flood affected areas. They offer to handle the insurance claim on your behalf (sometimes inflating the claim), collect large upfront payments, then perform substandard work, disappear with the money, or hold the project hostage for additional payments.

Lowball bids and change orders. The contractor submits a bid dramatically below competitors to win the job, then buries the homeowner in change orders for “unforeseen” issues that any competent contractor would have identified during the estimate. The final cost exceeds the legitimate bids.

Permit avoidance. Unlicensed contractors skip permits to save time and money. Work done without permits may violate building codes, void your homeowner’s insurance, create liability issues, and reduce your property value. You, the homeowner, are legally responsible for unpermitted work on your property.

Protection Measures

Verify licensing and insurance. Check your state’s contractor licensing board. Require proof of general liability insurance and workers’ compensation. If a worker is injured on your property without workers’ comp, you may be liable.

Get multiple written bids. Three to five bids from licensed contractors for the same scope of work reveal the market rate and help identify outlier bids (both suspiciously low and inflated).

Never pay more than 10 to 30 percent upfront. State laws vary, but most limit initial deposits. Pay in stages tied to project milestones. Never pay in full before work is completed. Never pay in cash without receipts.

Get a detailed written contract specifying scope of work, materials, timeline, payment schedule, warranty, and change order procedures.

Check references and reviews. Contact recent clients. Visit completed projects if possible. Check BBB ratings and state attorney general complaints.

For more on how door-to-door social engineering works, see our social engineering defense guide. To protect against contractor scams that follow natural disasters, explore our insurance scam awareness guide.

Permits and Inspections

Work requiring permits varies by jurisdiction but generally includes electrical, plumbing, structural modifications, roofing, HVAC, and additions. Your local building department can tell you which permits are needed for your project. The permit process ensures work meets building codes and is inspected by qualified officials.

If a contractor suggests skipping permits to “save time and money,” this is a major red flag. Unpermitted work can void your homeowner’s insurance coverage for related damage, create code violations that must be corrected before selling your home, and create safety hazards that inspections are designed to prevent. You, the homeowner, are legally responsible for unpermitted work on your property, even if a contractor performed it.

Payment Protection

Never pay the final installment until all work is complete, inspected (where applicable), and meets the agreed specifications. Hold back at least 10 percent for punch list items. In many states, contractors must provide a lien waiver upon final payment, confirming that all subcontractors and suppliers have been paid and cannot place a lien on your property for unpaid bills from the project.