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Home renovation boom: What to know before hiring a contractor

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Yahoo Finance Contributor Vera Gibbons joins the Live show to discuss the home improvement demand amid supply shortages, upcoming rate hikes, and tips for hiring a contractor.

Video Transcript

AKIKO FUJITA: Well, homeowners who are looking to give their house a bit of a facelift may be in for a big surprise. Labor and supply shortages are complicating home improvement projects across the country. Let's bring in Vera Gibbons, who's a Yahoo Finance contributor.

And Vera, this is-- you know, we talk about the lack of affordable housing. And then those who are looking to maybe potentially get in on a house and fix things up are looking at inflated prices, too. And then you add on homeowners to the mix. I mean, what are we seeing right now in terms of how much higher costs are going as a result of these shortages and when it's likely to ease?

VERA GIBBONS: Oh, it's insane out there, particularly in this Florida market, where I am. So contractors are extremely busy right now. You know, historically, they've always bitten off more than they can chew. But given the fact that so many people are moving around, fixing things up, expanding their yards, adding patios, setting gardens, doing the landscaping, adding home offices, all sorts of stuff to make the home more comfortable, these contractors have more work than they can possibly handle.

You know, this was a game they could long play, move from project to project and get things done. But as you point out, given the labor shortage and the unpredictability of materials, consumers are getting frustrated with the process overall.

BRIAN CHEUNG: Hey, Vera, it's Brian here. Now when people can get contract work, there's some issues that are there, too. First of all, you have maybe contractors not following through on what they promised because they're rushing to another project, or in some cases, just outright scams because they're trying to take advantage of how everyone wants to find a contractor. First of all, what type of issues are you seeing consumers facing? And if they have any problems, are there any remedies or anywhere they can go to get some help?

VERA GIBBONS: You mentioned some of the biggest issues. And shoddy work would be the top consumer complaint filed with state and local authorities, as well as the Better Business Bureau. Shoddy work as in removing beams and walls that they shouldn't have, for example. I had one story of someone who said they actually did that.

And she's now on her ninth contractor. She's gone from one to the next since closing her house last March of 2021. That's almost one contractor a month. So she's had continual issues with bringing in different guys to clean up the mess of the previous guys. So there are those stories out there. And I think that the complaints are scheduled to hit an all-time high this year.

AKIKO FUJITA: So what recourse if-- I mean, what can homeowners do if something goes wrong? They've already signed the contract.

VERA GIBBONS: Well, first of all--

AKIKO FUJITA: They've hired the contractors. I mean, what next?

VERA GIBBONS: Well, that's [INAUDIBLE] contractor on the phone. Part of the problem, Akiko, is that people are hiring the first contractor who actually returns their calls because they're just so busy right now. You may call six guys, and one guy may call you back, and you may go for him. Others are actually falling for, you know, oh, give me 50% down, and I'll start tomorrow, kind of thing. That is a big mistake that a lot of people are making.

I think a lot of the mistakes are being made by first-time homeowners in general, which there's a lot of us out there. So they're not actually taking the time to go through the vetting process to do the due diligence. And then that's resulting in their filing complaints with the BBB or taking a small claims or suing. Your best bet is to actually take the time to do the due diligence in advance to save yourself time and money.

That woman I mentioned who's on her ninth contractor, she's now, you know, forked out over $200,000 for what was expected to be or was projected to be, like, a $50,000 renovation. So she's cleaning up the mess of the guy's work over and over and over again because she didn't actually take the time to vet these guys out.

BRIAN CHEUNG: Nine contract-- one is already stressful enough. So what can people do when they're looking-- let's say the process hasn't even started yet. They're doing planning, looking for contractors. What do they look for to make sure they don't get scammed or don't end up with someone that's not going to do exactly what they're asking them to do?

VERA GIBBONS: Well, make sure they're licensed, insured, bonded, first and foremost. A lot of these guys are just lying, you know, just to do the work. So licensed, insured, bonded. Also check their references. Check their work if you can. Go see their projects. Don't take the first guy that comes along. You obviously want to get three to four estimates. You want to avoid that lowball offer because that perpetually ends up in big problems down the line.

You know, the problem with a lot of these people, according to one fraud expert I spoke to, [? Joni ?] [? Costello, ?] is she says the trust factor is huge. A lot of people just trust these guys right off the bat. They come into their home. They demand a big payment up front. And they get taken for a ride. So, again, it goes back to your taking the time to vet these guys out.

A lot of the problems now have to do with the fact that people are so anxious to get the process done because they're spending so much time in their homes. They're working from home. They're raising their kids in their homes. They want bigger bathrooms. They want bigger living rooms. They want bigger outdoor spaces. They want everything done now. And haste makes waste because it's costing them in the long run.

BRIAN CHEUNG: Yeah, a little bit of patience definitely a little bit helpful. But Vera Gibbons, Yahoo Finance contributor, thanks so much.

VERA GIBBONS: Thanks.