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10 Steps to Avoid Contractor Rip-Offs

USAA members James and Carolyn Butler did lots of things right when they hired a contractor to remodel two bathrooms in their Phoenix home. They chose a licensed professional, visited his company's kitchen-and-bath showroom, checked with the Better Business Bureau (BBB), and received a written contract. Two years later, they're still trying to settle a claim for incomplete work on the $11,000 job. Their biggest mistake? They paid in full before the project was completed.

The Butlers checked out their contractor with the Better Business Bureau (BBB), which had no complaints on file. Another Arizona agency had one open complaint, but everything else seemed legit. Professional scam artists know how to get around the rules, but these guidelines can help you find someone reputable.

Here are 10 tips to help you thwart scam artists that will take your money and leave your financial house in shambles:

1. Seek referrals. Talk to friends who have done similar projects. Ask your county's building inspector for recommendations. You can also check for reputable area contractors with the National Association of the Remodeling Industry at nari.org, the National Association of Home builders at nahb.org, or the BBB at bbb.org.

2. Check credentials. Call your local BBB to find out how long a company has been in business. If your state requires contractors to be licensed, registered, or bonded, contact the regulatory agency to make sure yours has met the requirements. How? Visit contractorlicense.org to find out.

3. Visit job sites. Are they clean? How do workers handle tools and materials? Are dust covers used to protect belongings? Remember, they'll keep the same habits on your turf.

4.  Ask potential hires to document insurance. Contractors should carry workers' compensation, property damage, and personal liability insurance. Ask for the documents and look for expiration dates when they come to do your bid -- you don't want coverage to expire before your project is done.

5. Remember the subs. General contractors may hire others, called subcontractors, to work for them. If so, make sure they, too, have all of the necessary licenses and insurance. And have your contractor specify in the contract whom he or she hires.

6. Get written estimates. Get bids from at least three reputable contractors. If prices differ widely, find out why. Don't automatically choose the lowest price. You might wish you'd paid more later.

7. Seal deals in writing. Make sure start and completion dates, scope, materials, costs, payment schedule, and all promises are in the contract.

8. Read and understand the document. Don't assume anything. If you're unsure about the jargon used or any of the wording, let an attorney review the contract for you.

9. Don't pay a lot upfront. If a contractor asks for more than one third down, walk away. And whatever you do, don't pay the final installment until the work is completed.

10. Never dole out cash. Use a credit card or check and keep receipts. That way, you have proof of payment all along the way.

USAA is a diversified insurance and financial services organization that has served the military community since 1922. USAA Financial Planning ServicesSM refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency, and its wholly owned subsidiary.
USAA means United Services Automobile Association and its affiliates.

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