PHOENIX - Upfront fees, and the scams that come with them, are some of the toughest to expose before you become a victim.
That's because these scammers usually meet with you face to face, talk a good game and make you feel comfortable.
But even though they might have great rates, attentive employees, even examples of their work, you have to remember to be especially vigilant when choosing whom to hire and how much to pay them.
The simple truth is this--the more money you pay upfront, the more you will lose if the business or person you decided to do business with, picks up and takes off.
We expect big loans like mortgages and auto financing to require a small percentage upfront to process the loan.
Things aren't as clear cut when you're dealing with services like home contract work and auto repairs.
That's why you have to start out ready to set specific terms or walkaway.
Never pay a lot of money before work has begun. If a business doesn't have the cash flow for materials or to pay employees before work starts, then they probably won't have the money to finish your job.
It's a huge red flag, so you will want to steer clear of the company that operates that way.
Now assuming you've made sure the company you are dealing with is legit--from a thorough search of licensing, certifications and complaints against the owner and company name--a good rule of thumb is to pay upfront, 10 percent or $1000, whichever is smaller for a job.
This amount and everything else about the job needs to be spelled out in your contract. Itemize exactly what work is to be done and the dates on which each phase is to be completed. Make sure all material and labor costs are included as well, and make absolutely sure the payments you make are directly tied to the progress of the work. So the day that 25 percent of the work is completed, the company is entitled to the remainder of 25 percent of the balance.
There are times when you should never pay anything upfront.
Like mortgage rescue firms that demand upfront fees--it's illegal. You cannot be charged for a mortgage re-modification until after the work is complete. If that happens, report them to the Arizona Attorney General's Office then look for a reputable company that is willing to follow the rules and be paid after they have worked on your behalf.
And if you're looking for a job, a real company will never ask you to give them money, in order to secure it. If you are offered a job, and asked to cash a check or return money to them for an overpayment, run. It's a scam.