After a disaster, fraud artists may show up because there's always more repair work than qualified contractors can handle. These con artists may offer promises of top quality repairs, but either overcharge, purposefully do shoddy work, skip town before the job is done, or all of the above.
That's why Freddie Mac requires mortgage servicers to work with homeowners and their insurers when disaster strikes and ensure that the majority of the insurance money is not released until the repairs are approved and inspected for completion. This helps protect everybody from being ripped-off.
Here are some tips to help you protect yourself from scam artists after a disaster:
Ask for the contractor's license and certificate of insurance. Verify they are licensed to work in your state and call the insurance company on the certificate to verify their coverage is in place.
Get references of past work and call them, too.
Be skeptical of high pressure sales tactics or expensive bids for temporary repairs.
Get a written estimate that includes the contractor's oral promises.
Verify the planned repairs are covered by insurance with your servicer and/or insurer.
Don't sign until you've read and understand the contract. Make sure all blanks are filled in and the work, materials, completion date, and final price are described accurately. (Ditto for the contractor's address and phone numbers.)
Only pay with a check or credit card, avoid cash. A deposit of one-third of the total cost is standard with full payment coming only after the work is satisfactorily finished. Talk to your servicer before agreeing to an upfront cash payment to move your job to the top of the contractor's list.
Listen to your gut. If something still feels wrong, take your business elsewhere.
For more details on paying for repairs after a disaster with insurance money, call your mortgage servicer or insurance company. For more tips for avoiding fraud, see My Home by Freddie Mac®.