Can You Get Money Back From Remodeling

Five Ways to Get Your Money Back From Bad Contractors

6 min read February 5, 2018

Millions of homeowners hire contractors every year, and are thrilled with the results they get, but it's "practically the norm of homeowners who get a horror story about their contractor instead," said Jody Costello, a San Diego resident and "pre-renovation coach." Costello runs a website dedicated to providing information and resources on the dos and don'ts of home remodeling, hiring contractors, and homeowner's rights. "It's the homeowner's responsibility to ensure that their rights are protected and not violated by unethical contractors," Costello said. "The contractors have rights and the homeowners have rights. They understand both, and so should you." At the least, those unhappy homeowners are victims of contractor incompetence, and at worst they're victims of outright fraud and failure of performance.

Teamwork Of Business Man Contractor Working Meeting In The Offic

Many homeowners consider contractor failure and their financial losses part of being a homeowner, but others choose to go after the contractor to recover their money. Is it worth the hassle, time and effort? Yes, say experts. It is.

"It depends on what you've already lost and how mad you are," Costello said. Costello and her husband took a contractor to court 15 years ago and won. "It was a long, expensive, drawn-out fight," she said. But out of that was born her business: Contractors from Hell.

Obviously, the best way to ensure you don't lose money to a fraudulent contractor, Costello says, is to do your due diligence and research as much as you can before hiring them, like their credit scores, whether they're on a cash and carry, or credit basis with local suppliers, and how many liens and lawsuits they have against them. But if you haven't done that there are things you'll need to do if you decide to pursue collection.

Homeowners have more options to get their money back than they think. Using one or more will help, but getting your money back is often a long, painful, and expensive process. It's better, Costello said, to do your due diligence beforehand to ensure you're hiring a competent, legal contractor:

Hire an attorney. It's another expense and it takes time, but it's often the best option for getting your money back if the amount is above what your state recovery fund allows in a complaint (typically $20,000).
Small claims court. If the amount is $10,000 or less, or whatever limits your state's small claims court allows for litigation, this might be your best option. No attorneys are allowed and you represent yourself with documentation, photos, contracts and other "evidence." If the contractor fails to show for the hearing, you win by default. But, it's up to you to pursue collection of your claim/win.
Contact the state's licensing board. State Board's for Contractors licenses oversee the businesses engaged in the construction, removal, repair, or improvement of facilities on property owned by others. They issue, and can cancel contractor licenses. Contractor licenses consist of two parts: the class of license (A, B, or C), which determines the monetary value of contracts/projects that may be performed, and the classification/specialty, which determines what type of work is allowed. The Board also regulates individual tradesmen, such as electricians, plumbers, etc. There are three ways to file your complaint with the board (Phone numbers vary from state-to-state, so search for your state board online by searching on your state, and filing a licensing complaint):
- Call to have a Complaint Form mailed to you OR
- Use the online complaint Form, OR
- Download and Print a Complaint Form
The Board also licenses individuals and firms engaged in residential building energy analysis, which involves evaluation of energy consumption and recommendations to improve energy efficiency.
Contact the Better Business Bureau (BBB). The BBB rarely files negative responses on dues-paying members, but their report to you may be used to show a court of law you have exhausted all avenues in seeking to get your funds returned.
Consumer reporters. If you're lucky enough to live in an area where there is a television, radio, or print reporter who acts on the behalf of consumers to right wrongs and expose fraud, you might be able to have them investigate and report on your issue for free. Simply call your local television or radio station to ask.
Withhold further payment. Contractors often "rob Peter to pay Paul," as the old saying goes. In other words, they use the funds they collect from one customer to complete or pay for the job of another. It's a dangerous way to run a business, but many contractors do it. For contractors who have walked off of your job, or are slow to complete certain phases of it, or to finish it, withholding payment is an excellent way to make your point and get your job completed. Make sure your contract specifies the conditions of payment first.
Social media. In the day of Yelp, Google Reviews, Facebook, Twitter, Instagram and other social media sites, broadcasting photos and critical reviews of the contractor and their shoddy work is a powerful option. Make sure you have documented proof of the job, the deception or fraudulent work, and your signed contract before taking to the web. Sometimes merely telling the contractor you intend to turn to social media is enough to get them to make things right. Not all handymen and women who do bad work are incompetent. Some just need the right encouragement to return and finish or correct a job.
The Contractor, or Homeowner's Recovery Fund. The Contractor Recovery Fund (sometimes called a Homeowner's Recovery Fund) compensates owners or lessees of residential property who have suffered an actual and direct out-of-pocket loss due to a licensed contractor's fraudulent, deceptive or dishonest practices, conversion of funds or failure of performance.

In most states, homeowners must have exhausted every other legal avenue for recovery before they can seek assistance from the fund. The entire amount a homeowner lost isn't guaranteed, but for many homeowners, this last-ditch option does get them some of their money back. Search the Internet for "Contractor or Homeowner's Recovery Fund" to find out what requirements you must meet before filing a claim.

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How to improve your chances of winning a claim against a contractor

If your contractor suddenly disappears after you pay them, or leaves you hanging with half-finished projects and no explanation or communication with you, start recording your efforts to reach him or her. You may need this documentation later if you go to court or seek the help of a professional organization.

Document all your written and spoken correspondence – every phone call, every letter, every text or email. "Send certified letters [with return receipt requested], explaining the problems you're experiencing and telling the contractor that it is imperative that he contact you immediately," said Costello.
Journal. It's not enough to keep track of letters and communication. Document the impact the poor construction or unfinished work is having on you and your family's life. Did it rain or snow? Did your electric bill suddenly increase? Did other systems (plumbing, lights, electrical) begin to fail, or fail as a result of the construction? Write down the day, the date, the time and the exact issue. Remain calm and be specific in your description as this journal will be used in court and the judge needs to see you're being reasonable and rational about your complaint.
Keep track of all your attempts to get your money back or your home repair fixed. This includes written and spoken correspondence, but also any social media tweets, texts, reviews, or postings and any response to those postings. While your postings may not get your money back, they're a great way to find other victims of the same contractor.

Even if you don't plan to pursue the contractor to get your money back, file complaints everywhere you can and let others know about your experience. Your complaint may be the one that sparks an investigation.

Becky Blanton is a full-time ghostwriter and writing coach for Fortune 500 companies, CEOs, and business speakers. In 2009 she spoke at TED Global at Oxford University, her first ever public speaking gig. When she's not writing, she's kayaking in the Chesapeake Bay. Her dream home is to live aboard a sailing or houseboat.