The Low Bid Contractor Scam and How it Can Be Avoided

With the housing slowdown in our area, thousands of building contractors and sub contractors are finding themselves without work. Many of these building contractors are honest guys looking for small jobs here and there to make ends meet. Some of them however, are a bit on the unscrupulous side and will drastically undercut the competition to win the bid. Once these “low bid” contractors have been awarded the job and collect their materials deposit, they put in just a few days of work before bailing out of the job. Some of these guys are clearly scam artists, while others are just poor businessmen who underestimated the extent of the job and then quit while they were still ahead.

Whatever the reason, getting these contractors back to finish the job takes going to court and even then, you have no guarantee that the job will ever be finished. In some cases, the damage caused by a few days of sloppy workmanship may even cost you more money to undo than the cost of the original project itself.

If you are planning on having some remodeling work done on your home, this is a great time to have it done at an affordable price. However, to protect yourself from those low bid contractor scams, these tips will help.

Ask for referrals

Your friends and relatives should know “guys in the trades” they can recommend. A personal recommendation is the very best way to find a contractor that does quality work in a timely fashion, and will be fair and honest.

Has a verifiable business background

Legitimate contractors have identification or business cards, a business address, working phone, referrals they are willing to share, insurance policies, and are typically licensed to do the work. Your local Planning & Zoning department can tell you what contractor’s licenses are required for your state. Checking with the Better Business Bureau is also a good idea.

Provides comprehensive written bids

A comprehensive bid is one that spells out all the details of the job, including the materials being used and the estimated time involved. Most contractors take at least a few days to prepare a thorough bid. Bids that are quickly scribbled on a sheet of scratch paper aren’t worth much, and a legitimate contractor would never do business in such a haphazard way.

Bids are within the ballpark of others

There’s an old saying that reads “if it’s too good be true, then it probably is.” As you begin to gather bids, and discover one coming in half that of the competition, then that alone should send out warning bells. An unusually low bid means the contractor either doesn’t understand the extent of the work, uses shoddy materials or sloppy workmanship, or plans on taking a powder one week into the job.

Use caution when giving money “up front”

For a small job, legitimate contractors will never ask for money up front. Larger jobs such as painting, framing, and roofing work, may require a 1/3 materials deposit up front. While this is pretty standard business, it is also risky business, especially with a contractor you don’t know at all.

If the idea of handing a materials deposit over to a stranger really bothers you, there is another option. We’ve discovered that most legitimate contractors don’t mind if the customer pays his vendors directly. With this option, the contractor is not out any costs up front and the customer has the assurance that his money was used for building supplies. If your contractor throws a fit over this arrangement, then it’s best to move on and find another contractor that is willing to work with you.