Contractor Red Flags: Decoding The Dirty Tricks of the Trade

Thursday, February 22, 2024

The Larossa Workshop Blog/Contractor Red Flags: Decoding The Dirty Tricks of the Trade

Contractor Red Flags: Decoding The Dirty Tricks of the Trade​

A deep dive into the deceptive practices of some contractors. Understand the classics, advanced maneuvers, and outright criminal acts to stay one step ahead.

Most Contractors are great people. Some of the best really.
However, some are dirty people with Dirty Little Tricks. In fact, some are downright CRIMINAL!!

Over the years of doing this, I have taken note of these Dirty Little Tricks and broken them down into 3 main categories/lists:

  • Classics - You probably already know them, but just in case you don't. Plus I'll help you label them.
  • Advanced - Like all things, these tricks evolve and get harder to pick up on. These are 5 that I have caught.
  • Criminal - Some go beyond just trick into criminal acts. Unfortunately, I've experienced this as well.

After we go through all of these, I will give you the best ways to prevent these from happening to you.

I think you would be surprised at how prevalent these tricks are in the industry. I would say that a big part of my job is sniffing these out and I sometimes even catch some of the good contractors doing these without even knowing it. Like they are somehow in the blood of people who choose the career. I highly doubt that is the case. It’s more likely a combination of things, but that is for a whole different blog.

If you’re going to go out there and have success as a Real Estate Investor you need to be equipped to see these tricks. So with no further ado, let’s start with

The Classics:

  • The X-Ray - How are there termites in every wall? It’s gonna cost how much? You get it. This is the one where there are surprises inside the wall and they are ALWAYS really scary and ALWAYS cost a bunch of money.
  • The Kick Back - This one has stood the test of time in many industries. The way it works is simple: a contractor has a relationship with a vendor and has them add a “special markup” that ends up back in their pocket. Here is an example, your contractor has a tight relationship with the lumber yard operator. He goes to buy $4,000 worth of lumber and says to the operator “call it $4,400 and we’ll split the $400”
  • The Black Hole - Work is happening, everything is going good, you’re already thinking about the next flip that you’re going to do then……why hasn’t the contractor been there for the past week? Why isn’t he picking up his phone? Now it’s been two weeks? A month?!?! But we’ve already paid for work!
  • The Abe Lincoln - “Lets just shake on it” they say. You’ve basically discussed the whole job with each other. You’ll just trust the contractor’s expertise. They’ll for sure have all your interests in mind and understand the vision perfectly. No problem, it’s just like at your corporate job. It’s great working with polished pros!
  • The Loss Leader - Just like those fresh melons that are half priced when you walk in the grocery store. You saw the ad in the newspaper and here you are to get that great deal ... .while you’re here you might as well grab some apples too! Just think about your initial bid/estimate as the melons. The apples are those couple of walls you wanted painted in the basement since they are already there. Those apples have a HEFTY markup.

Those have been around for years
for the most part they are easy to see coming and hopefully you are protecting yourself against them. Over time (and this industry has been around for a long time) these have evolved into some more advanced tricks and to be successful you’ll need to follow suit by becoming aware of

The Advanced Tricks:

  • The Hostage - This is one that happens when permits are getting pulled. It’s difficult, uncomfortable, and costly to fire a contractor who has permits pulled on a project and they know this. You get a few bids for the electrical work on a flip house and they all say this is going to be around $12K because we’re going to have to rewire it. One contractor comes in and says, I can do this for $3K because if we do the XYZ we can avoid the rewire. They know this is not the case. They do the $3K then they call in the inspection and when the inspector says that it needs a rewire, the contractor hits you with a bid for $15K. They have the permit though so you’re up against a wall.
  • The Broken Tape - Pretty simple, but often overlooked. Your house is 1500 SF and you get a bid for 1600 SF of flooring. This would be an easy one to catch, but do you know how many Squares your roof is? Or even how to measure that in the first place? A dirty contractor knows that you don’t or won’t.
  • The "Fair" Pay - “Half the work is done so it’s “fair” if I get paid for half of the bid.” Is it? Let’s say it’s a $10K job and they do half of the work (on paper). Well could you then get the rest of the job done for $5K? I doubt it! There are multiple reasons why you can’t, but here are the biggest two: 1) all the cost efficiencies are gone 2) all the easy tasks got done first and now only the hard ones are left.
  • The Omission - This one almost got me the other day on a large demo job. In the tiny detail of the bid mentioned “dump fees not included.” What?? That’s like sending a bill for the ketchup on my cheeseburger! Well I eat a lot of cheeseburgers. What if you’re a new investor, would you know to make sure the ketchup was included?
  • The Oopsie - A contractor is hired for the whole project and they accidentally demo too much. “Don’t worry, we won’t charge you for the extra dumpster we had to buy. That’s our fault.” Well who is going to pay for the extra work to put it all back together?

Before we get to the 3 that are CRIMINAL scams, lets go over the best approaches to protect yourself against these Dirty Tactics. I really believe that there is an Evergreen Approach to solving this problem. It revolves around 3 things really. The concepts are simple, however the execution can be grueling.

1.  Repeatable Systems for Project Management - This is for your confidence, peace of mind, and ultimately your brain space.
2.  Recruiting and Maintaining Relationships with Quality Vendors - Over time as you level up your vendor pool there will be more trust, ease, and fun.
3.  Never Allow Yourself to be in a Cash or Time Crunch - These issues are like blood in the water for a shark. Plan appropriately. Make sure your decisions filter through a CLEAR mind.

Now for the Bonus round. You may think these seem crazy, but I promise you they happen. I have personally experienced all 3. Unfortunately for my younger, dumber self I had to learn too many lessons the hard way. Lucky for you I’m working hard to share those lessons. So check out some of my other blogs and videos. Now

The 3 Criminal Contractor Tricks:

  • The Photoshop - “Can you send me pictures of those installed floors before I pay that invoice?” NO PROBLEM! You won’t find out until much later that the floors, the paint, even the kitchen cabinets were either pictures of a different but similar project or even straight up photoshopped.
  • The Swap Out - How are the HVAC units and appliances always bad? Aren’t there any that don’t need to be replaced? Not when they are all in your contractors garage! Yes, I’ve seen this one on a large scale.
  • The Cash N' Dash - Simple. Pay up front. Ghosted. Hello Cancun!

Be careful out there investors! These things actually happen. This is not to say that contractors are bad. However, you’re going to go through some bad ones before you find the good ones so you better know how to keep your head above the water.

customer1 png

Hi, I'm Ross Paller

CEO Of Larossa

After flipping over 300 houses, holding a portfolio of 150 properties, and creating a successful construction company for over a decade, I felt compelled to pay it forward by sharing the wealth of knowledge and experience I’ve accumulated on my journey.

1 png

Learn to Systematize your Real Estate Investments

One tip at a time...

We spent over a decade focusing on one thing: creating systems to remove the complexity and headaches that come along with renovating a home.
​This allowed us not only to scale to flipping over 300 homes, but to have predictable, reliable returns, and most importantly peace of mind knowing that we would never have major unexpected construction costs.

Each week I take the time to make sure I send you something valuable and useable

Exclusive For You

Weekly Larossa Newsletter

We sit down each week and figure out how we can send you the most valueable and useable tips possible to help you increase your skills and ultimately your profit in Real Estate Investing.