About Real Estate: Home remodelers should be wary of a contractor’s ‘lowball’ bid
A demand to be paid in full before work begins often is a sign that a contractor isn#146;t on the level. It also might be illegal.Q. We are planning a large remodeling project and have interviewed several contractors for the job. One contractor says he can do the work for about half of all the other bids we have received, provided that we pay him for the entire job in upfront cash. He has given us a written contract and has even said that he will have it notarized. Is this deal legitimate?
A. I#146;d be wary of such a lowball bid, even if the contractor agreed to have his tongue notarized.
Bids from professional remodeling firms rarely vary by more than 10 percent or 20 percent, assuming that they would use the same materials and get the proper building permits. An ultralow bid is often a warning sign that the contractor might not be legit, according to consumer watchdogs at the Federal Trade Commission.
Further, it#146;s illegal in most areas for a contractor to demand payment in full before work begins or to insist that the bill be paid in cash. The FTC says that such demands often are additional signs that a contractor isn#146;t, er, #147;on the level.#148;
If the contractor took all your money and then skipped town without doing the work, his notarized contract wouldn#146;t be worth the paper it was written on.
The FTC says homeowners also should be wary of contractors who solicit door to door, offer discounts for helping to find additional customers, use high-pressure sales tactics or say they can offer a deep discount because they have material left over from another job.
Never hire a contractor for a major remodel without first verifying his license and workers#146; compensation insurance with state officials. It#146;s also a good idea to personally inspect the work he has done for other homeowners in the community.
Of course, you also should insist that the contractor put all of his promises in writing. There#146;s no need to have the document notarized, but you might want to have it reviewed by an attorney if the remodeling job would cost more than a few thousand dollars.
Several other tips to help choose a good contractor can be found on the FTC#146;s outstanding website, www.ftc.gov.
Q. We have been shopping for a camper, or maybe even a small RV. One salesman said the vehicles qualify as a #147;second home,#148; which would allow us to take a tax deduction for all the finance charges on the loan we would need to make the purchase. Is this true?
A. Owners of campers, other recreational vehicles, house trailers and even sailboats usually can deduct all of their interest charges, provided that their vehicle or vessel meets a few basic Internal Revenue Service requirements.
Interest on loans for most cars, trucks and boats are not tax-deductible. But under IRS guidelines, a motor vehicle or even sailboats can be considered a #147;home#148; #8212; allowing the owner to write off the loan#146;s finance charges #8212; if it has sleeping, cooking and toilet facilities.
The interest isn#146;t deductible if only one or two of the three criteria are met.
Collateral for the loan usually must be secured by the RV or boat itself. That means that you can#146;t take out a personal loan to pay all cash for a camper or watercraft and then expect Uncle Sam to help subsidize the purchase by providing tax deductions for the unsecured loan.
Few RV salespeople are also tax experts, so you should check with an accountant or similar professional for more details.
Q. You recently wrote about the advantages of getting an FHA mortgage to buy or remodel a house, but we don#146;t have access to the Internet, and there is no listing for #147;FHA#148; or even the Federal Housing Administration in our local phone book. What can we do?
A. You probably couldn#146;t find the phone number for the FHA because it#146;s part of the federal Department of Housing and Urban Development, commonly referred to as HUD.
Your nearest HUD office should be listed under the #147;United States Government#148; heading in the white pages at the front of your local phone book. An office representative can help you find more information about the FHA#146;s various loan programs.
As an alternative, you can call HUD#146;s toll-free number, 800-333-4636, to find a local lender that has been approved to issue mortgages that are backed by the government. Readers with Internet access should visit the agency#146;s useful website, www.fha.gov.
Ÿ For the booklet #147;Straight Talk About Living Trusts,#148; send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960
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