In this second installment of Borrower Beware, CMI examines home renovation scams and how brokers can help homeowners identify the warning signs in advance as part of the financing conversation.
As many homeowners look to fit in some last minute renovation projects as winter approaches, the sense of urgency to complete a project on time may make them more susceptible to fraud.
Home improvement scams are one of the riskiest in Canada according to the Better Business Bureau (BBB), with homeowners losing thousands of dollars to these cons each year. This scam typically targets vulnerable people, such as seniors or homeowners in neighbourhoods that have been impacted by a natural disaster. Even the most savvy homeowners may feel pressured to hire a contractor they are not totally comfortable with as the COVID-19 pandemic and supply chain issues have made finding a seasoned contractor for repair and remodelling projects much more difficult.
When discussing home renovation financing with clients, remind them to be aware of common scams and to be vigilant when hiring a contractor. Home renovation scammers come in various forms. A “contractor” may show up on a homeowner’s doorstep claiming to have noticed an issue and then make an offer to complete repairs or renovations at a below-market price. In many cases, con artists may ask for a large down payment, or even full payment up front, before leaving the homeowner with shoddy or incomplete work, or they may simply disappear and become unreachable.
Below are tips for homeowners to identify these common scams and avoid falling victim to fraud.
Beware of unsolicited offers – Be particularly skeptical of door-to-door solicitors or offers over the phone to provide services or repairs. It is common for scammers to approach homeowners under the pretence that they are already in the neighbourhood doing work.
Don’t feel pressured to make a decision – Scammers tend to use high-pressure sales tactics. Take as much time as needed to perform due diligence, including viewing past projects, and always obtain multiple estimates.
Validate references and check reviews – Get recommendations from people you trust and contact any references that a contractor provides. Do your own research and check online reviews.
Ensure the contractor is insured and qualified – Ask about a contractor’s warranty and check that they are licensed, insured and bonded.
Be wary of big discounts – Estimates that are well below market value are a big red flag and likely too good to be true.
Get your agreement in writing – Ensure that a contract is drafted that clearly outlines the work that is expected and the exact cost of the project from the get-go Establish a clear timeline.when specified payments are due based on the project’s stage of completion.
With these tips in hand, your clients will be well equipped to secure a reputable contractor. If, despite their careful diligence, your client falls victim to a home renovation scam, this step-by-step resource will guide them through exactly what to do.
Homeowners that fall victim to a renovation scam are likely out a significant sum of money and may have an incomplete project on their hands that requires quick attention. In situations like these, private lenders like CMI can help secure the financing needed to restore their home. Unlike banks and other traditional lenders that need to see that a project is almost entirely completed to approve funding for a renovation project, CMI has greater flexibility to fund projects at various stages of completion. Remember that CMI can look at each scenario on a case-by-case basis to find the right solution for your clients.
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