Could Recession Actually Reduce Home Improvement Scams?

By all accounts, the recession is likely to increase any number of scams, including those directed at homeowners. Foreclosure scams in which con artists disguised as lawyers, real estate agents, and other forms of assistance are running rabid. These scams can cost homeowners money for services never rendered or, in some cases, con artists can steal the very home they've promised to help the homeowner save. Yet, a case can also be made that home improvement scams will actually decrease during this recession, as market forces and homeowner behaviors close previous vulnerabilities.

Recession may Balance Supply and Demand for Home Improvement Contractors
This is where home builders, the home improvement industry, and the economy converge. With new housing starts experiencing record declines, droves of subcontractors who used to be tied up in the home building industry have entered the home improvement arena. This has helped balance the many areas of home improvement that have seen too many jobs seeking too few contractors. The reduction in the gap between supply and demand has directly reduced the space in which home improvement scams thrive. Several analysts have predicted that the housing market will bottom out and begin to recover some time later this year. Yet, even if this turns out to be the case, the recovery of the home building industry and, in particular, the hiring of subcontractors will take longer to catch up, leaving a decent time interval for this balance to exist.

Less Money, Less Trust Equals Greater Diligence
Along with the well-documented decrease in Americans' spending power and personal wealth, we also trust businesses less and less. Consumer trust levels have decreased in every area from gas stations to grocery stores, from car mechanics to banks. Consumers who rated their trust level in home improvement contractors as either a "great deal" or "quite a lot" have decreased from 27 percent to 24 percent from Sept. '07 to Aug. '08, according to a Better Business Bureau/Gallup survey. Meanwhile, consumers who trusted home improvement contractors least rose from 24 percent-27 percent over the same period, with nearly half the respondents saying they trusted these contractors somewhat. Drilling down, consumers in the 35-49 age group and consumers who made more than $75K registered the lowest trust levels, with both groups at 18 percent.

Needless to say, with less money and less trust, homeowners aren't taking anything for granted. At the same time, better information has helped create a general rubric for homeowners who hire home improvement contractors. Getting multiple estimates, checking background information, and talking to referrals have become increasingly standard practices for homeowners.

Timeless Scams and Misleading Stats
Whatever else is going on with the economy or the residential construction industry, some home improvement scams aren't going away any time soon. By far the most common trick is the "same-day special," where a contractor claims to be passing through the neighborhood or has leftover materials from another project. Anything that has to be done, signed, or committed to that day is almost always a scam.

It's difficult to prove any effect the recession may be having on home improvement scams, but market forces do provide solid, though circumstantial, evidence that home improvement scams may fly in the face of other industries, when considering recession-related cons. Consider that while the number of complaints filed with the BBB for home improvement contractors has been consistently growing, the percentage of complaints that were settled also increased. Thus, while more and more homeowners have realized the value of the BBB and other consumer advocacy groups, the overall quality of home improvement services may, in fact, be improving.

New Homeowner Resources
Homeowners have greater resources than ever before when it comes to identifying the credibility and overall quality of home improvement contractors and manufacturers. Consumer reports for home improvement products are becoming increasingly available and increasingly reliable. There are also a number of online resources that will match homeowners to home improvement contractors, and a few, like industry leader ServiceMagic, that actively probes, researches, and publishes both the credentials and the customer feedback for all the contractors in its database.