Roofing Company Caves, Leaving Homeowners Out Thousands

The takeaway from this story about a roofing company that went under, taking people’s deposits with it, is to never pay for a job in full and up front. If the company stipulates this, the BBB says it’s a big red flag.

Local homeowners out thousands after roofing company closes [9News] (Thanks to Devon!)

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  1. DanRydell says:

    The guy in the article was paying with an insurance check, which is apparently why he paid in full up front. I’d hope most people aren’t paying in full before any work is done.

    • DanRydell says:

      Every contractor I dealt with while renovating my house either took payment after the job (mostly jobs that were heavy on labor/expertise and light on materials) or took a deposit to pay for materials, then the remainder after work was done. In one case where the contractor screwed up I ended up getting him to agree to waive half of the remaining balance. I wouldn’t have had any leverage if I had paid up front.

    • EcPercy says:

      I hope people are at least doing half up front and half on completion. That’s how I do it when I have any large jobs contracted.

  2. mike1731 says:

    Interesting… Same company did the same thing in the Wichita market, messing up tons of local customers. My neighbor had these folks do his roof, they delayed work for over a month and a half, then a crew finally came in and did it in one day. Pretty remarkable my neighbor came out ok, lts others didn’t. Article below from the Wichita Eagle.

    http://www.kansas.com/2010/08/18/1452976/sedgwick-co-da-investigates-american.html

  3. humphrmi says:

    OK here’s where the red flags should have gone up for our hapless OP (via Channel 9 news in Denver):

    Kirkland says he was told, “If we find that there’s hail damage, then we’ll help you make a claim. When the claim is paid, we’re basically committing to you that well do your roof for whatever the insurance agrees to pay.”

    Ding! Ding! Ding! As soon as a roofing company gets involved in the financial side, like “helping you make a claim”, you have a problem. This also applies to roofing companies who help you arrange financing. Big problem.

    The bottom line is: you, the homeowner, must work with your insurance company to get a reasonable payment from them, then put that payment in the bank. Then, go find a roofer. Get a bunch of quotes. Then, trash all the quotes that require full payment up front, and from the remaining quotes, go about deciding based on product and workmanship quality & price. Then, you hire the roofer, and give them no more than a reasonable deposit so that they can secure materials. Oh, and make sure they’re bonded and insured.

    Any time a roofing company (or any other service company for that matter) tries to sell you on “We can arrange financing” or “We handle the insurance work for you”, run away fast. They are scammers.

    • George4478 says:

      The roofers have been going door-to-door here in Georgia for the past couple years with this “hail damage” pitch. I get a couple different companies every month come to the house.

      When I had my house re-roofed I picked the companies, researched them, got quotes, paid them a deposit for materials, etc.

      I don’t buy anything from door-to-door salesmen, much less something huge like a roof.

    • physics2010 says:

      I’ll disagree. There is nothing wrong with a roofing company working directly with the insurance company. There is something wrong if payment is made prior to both the homeowner and the insurance company signing off on the work.

      • humphrmi says:

        That’s not how the “We’ll work with your insurance company” scammers work. They want to get their hands on your insurance money before you do.

  4. mac-phisto says:

    in my state, we have a guaranty fund (paid into by all contractors) to cover unpaid judgments sought by homeowners for cases just like this. i would hope that colorado has a similar program.

    you should never pay in full for an unfinished job, but most GCs i know won’t start a job w/o the homeowner at least paying for the materials. in a situation like this one, you’d still likely be screwed.

  5. keepher says:

    I pay for my materials directly to the supplier. When our roof was replaced all of the materials were sitting here waiting for the crew when they got here.

    Same goes when I build. I pay for the materials needed. I’m not going to turn loose of that kind of money to someone I don’t know.

  6. H3ion says:

    This is sort of the reverse of the swimming pool article but in both cases, it’s the homeowner who ultimately takes the loss. For real estate transactions, deposits must be placed in escrow where the agent can’t touch the money. Can’t we ask our state legislators to do something similar with home repairs and improvements, where the contractor can only get paid when he does the work? It may increase costs a bit but it would prevent some of these problems.

  7. jim says:

    eh, IMO all these hail-damage deals are a scam. higher rates for everyone so that roofers can stay in business. your area never get hail? not a problem, since I see the stupid signs all over the place from people looking for a free roof replacement.

  8. Xero says:

    This guys house is right down the street from me! Luckily, I already had my roof repaired by the bank when I bought the home.

  9. Miss Dev (The Beer Sherpa) says:

    Never, ever, for any reason pay 100% of the money up front to a contractor. I have been scammed by several in my lifetime, but have managed to get most things corrected because I withhold the last payment.

    Now, I work for a solar company, and we split our customer payments into three parts: the third not coming to us until the job passes city/state inspections. This may mean we have to run a little leaner and our cash flow is tricky, but it instills a sense of trust in us from our customers and makes sure that we are doing it right the first time.

  10. mythago says:

    Wise advice. Also check with your state agency to make sure the contractor is licensed. A lot of businesses will give a “License” number, without revealing that the “License” in question is a license to do business – not a contractor’s license. Here, that means if somebody gets hurt on your property, YOU can be liable, not worker’s comp.

  11. H3ion says:

    I posted on an earlier article, one involving pools that weren’t completed and the mechanics lien laws. What I should have added was that the lien law is state specific. The Maryland law which I posted earlier favors the subcontractor. The Virginia law, one state away but in which the same builders and contractors generally operate, carves out an exception. If the general contractor has been paid, the subcontractor is not entitled to a lien.

    The actual language is as follows:

    A. Any subcontractor, in order to perfect the lien given him by § 43-3 shall comply with § 43-4, and in addition give notice in writing to the owner of the property or his agent of the amount and character of his claim. But the amount for which a subcontractor may perfect a lien under this section shall not exceed the amount in which the owner is indebted to the general contractor at the time the notice is given, or shall thereafter become indebted to the general contractor upon his contract with the general contractor for such structure or building or railroad. It shall be an affirmative defense or affirmative partial defense, as the case may be, to a suit to perfect a lien of a subcontractor that the owner is not indebted to the general contractor or is indebted to the general contractor for less than the amount of the lien sought to be perfected.

    So if you’re looking at lien laws,check the specific state in which the property is located.

  12. BridgetPentheus says:

    These door to door salesmen are a pain, when my husband and I sold our condo we stayed at my parents for 2 months before moving overseas, the same guy came around 3 times at least with the pitch that he noticed we could use new siding and that they were just doing a neighbour’s (a block with 12 homes) the first time we were polite, but said never come back, the second time we reminded him he had been by a week earlier and the third, I think if my dad could shoot him if he could. Don’t lie and say you’re doing work in the neighborhood and without coming on our property you can’t say what condition the house is in. (and trust me if he had been doing work anywhere in our area my dog would have recognized him in a second)

  13. Duckula22 says:

    The people who owned the company are still alive, so they should finish the job, even if they have to do it themselves. Just ask any shotgun.

  14. Promethean Sky says:

    I make my own roofs at home. No, seriously. When I needed roof work done several years ago, me, by brother, and my father did the whole damn thing. Are any of us roofers? No, though we all have some construction experience. Roofing isn’t complicated, it’s just hard. We saved a ton of money doing it ourselves. It’s even a bit over-engineered now, so unless we get hit with a tornado, it’s not going anywhere. Heck, it might even survive the tornado.

    • catastrophegirl chooses not to fly says:

      i have a friend who used to work as a roofer up on my roof right now redoing the shingles. if there was major structural damage i’d be looking for a roofing contractor though.

  15. El_Fez says:

    These guys should get together with the Half Done Swimming Pool Guys and throw a big ol’ party!

  16. common_sense84 says:

    This definitely sounds illegal. They knew in advance they were going to take the new client money and pay off the creditor. If they knew in advance the money would not be used for roofs, that makes this fraud.

    Also if they found out the company wasn’t going to do it within 28 days, the insurance company can reverse the check. The money should have been held for the first week anyways, making a reversed check very simple during that time. They should have immediately notified the insurance company so they could reverse the check.

  17. myCatCracksMeUp says:

    My roof was fixed via insurance and they initially only paid a deposit for materials; after the job was done and inspected they paid the remainder.

  18. peebozi says:

    contractors have a saying:

    “at least we’re not as hated as lawyers!”

    true story.

  19. Ayumi~n says:

    My mother actually did business with these people a few months ago. They pretty much did the same thing except my mom didn’t hand over the insurance check to them and didn’t pay the balance when she wasn’t satisfied with the roofing job. It definitely was not the best company to work with.