Home Improvement Rip Offs Made Easy

In New Jersey, two articles recently appeared in the Herald News that report on how some savvy, but unscrupulous contractors, often times in concert with a crooked mortgage broker or loan officer, rip off homeowners by selling home improvement jobs in which the contractor steers the financing to a third party lender. The rip off takes place when, after the lender pays the contractor most or all of the price of the job upfront, the contractor proceeds to perform shoddy work on the home. Since the contractor is already paid in full and the homeowner's debt is to the third party lender, they are unable to "hold back" part of the contract price that is a common remedy used when the homeowner owes the money directly to the contractor. According to one of the stories:

• "Contractors can help homeowners find financing to pay for their renovations, and a segment specifically target low-income residents. Too often, experts say, some of these companies steer customers into a second mortgage with above-average interest rates, huge fees and terms homeowners don't understand. These loans typically get sold to another bank without the borrowers' knowledge. If a customer stops paying the contractor because of poor work, the new loan holder will require reimbursement of the full loan amount, setting up a homeowner for possible foreclosure -- the loss of their home. Contractors, however, have a win-win setup. Home repair provides a powerful incentive for someone to take out a loan. Once the financing comes through, the contractor often gets the bulk of payment before work starts. A contractor's fingerprints rarely show up on mortgage documents. And if a client sues, lawyers often find it difficult to prove criminal intent by the company."

For more, see:

• Shoddy repairs raise homeowners' concern, and
• Savvy scammers in win-win situation.

For more on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, go here, and go here. StiffingContractorsTheta