veteringrepairsfraud

Vetting Public Adjusters and Contractors Before Listing: Red Flags Sellers Can’t Ignore

UUnknown

2026-02-25

10 min read

After storm damage, vet public adjusters and contractors: verify licenses, check for liens or convictions, and secure lien waivers to protect your sale.

Sold after a storm? Don’t let a bad adjuster or contractor turn your closing into a legal nightmare

Storm damage forces decisions under pressure. You need repairs done fast, an insurance claim resolved, and a clean title for a sale — not months of litigation, liens, or missing paperwork. In 2026, sellers face sharper regulatory scrutiny, more sophisticated fraud schemes, and buyers who run deep background checks before closing. That makes vetting public adjusters and contractors an essential step before you list.

Why vetting matters now (2026 context)

Recent enforcement actions — including a January 2026 sentencing of a Rhode Island public adjuster and restoration business operator for tax crimes and past convictions — show how quickly a vendor’s misconduct can ripple into a property transaction. Regulators and insurers tightened rules in late 2024–2025 following spikes in post-storm fraud, and states continue to expand license-verification databases and complaint portals. Meanwhile, buyers and lenders increasingly demand airtight documentation: permits, lien releases, and clear chains of payment.

Put simply: a negligent or criminal vendor can create:

Unpaid tax or judgment liens attached to your property
Mechanic’s liens from subcontractors you never paid because a contractor pocketed funds
Insurance claim disputes if an adjuster misreports damage or signs questionable assignments
Delayed closings, lost buyers, or reduced offers because lenders / title companies see red flags

Quick practical takeaway

Before you sign any restoration contract or assignment of benefits (AOB), run a targeted vetting checklist: verify licensing, insurance, complaint history, criminal or tax judgments, permit records, and secure contract terms that protect your proceeds. Below is a seller-focused, step-by-step guide you can follow today.

Seller-focused vetting checklist (step-by-step)

Step 1 — Verify licensing and registration

Public adjusters: Check your state insurance department’s license lookup. Confirm the license is active, see expiration, and review any disciplinary actions. Many states publish complaint summaries and consent orders online.
Contractors: Use the state contractor licensing board lookup. Verify the classification (e.g., roofing, general contracting) matches the work you need and confirm any bonding requirements are met.
If a vendor claims national certification (e.g., Xactware, IICRC), ask to see the certification number and verify with the issuing body.

Step 2 — Insurance, bonding, and workers’ comp

Ask for a current certificate of insurance (COI) showing general liability limits and workers’ compensation coverage. Call the carrier to verify — COIs can be forged.
For large projects, require proof of a surety bond. Bonding can protect you if the contractor abandons the job or fails to pay subs.
Confirm coverage dates cover the full projected timeline and any warranty period.

Step 3 — Deep background checks and public records

Don’t rely solely on reviews. Use public records to identify red flags:

Criminal records and convictions: Search state court dockets and federal PACER records for convictions or pending cases. A pattern of fraud or tax evasion is a major red flag.
Tax liens and judgments: County recorder and IRS public lien records can show if the business or principal has outstanding tax liabilities. The January 2026 federal case involving a Rhode Island adjuster shows how unpaid taxes can lead to massive restitution and judgments — and those creditors may pursue business assets or owner funds.
Civil suits and construction defect claims: Look for repeated lawsuits, arbitration awards, or large settlements. Multiple lawsuits indicate systemic problems.
Bankruptcy filings: A prior business bankruptcy isn’t always disqualifying, but it changes risk. Verify whether bankruptcy led to unpaid subcontractor claims or asset transfers.

Step 4 — Complaints and regulatory actions

Check your state’s insurance commissioner for public adjuster complaints and disciplinary actions.
Search the Better Business Bureau (BBB), consumer protection agency complaints, and online reviews — but cross-check dates and specifics. A single bad review isn’t dispositive; repeat themes are.
Check contractor-specific complaint registries and local licensing boards for unresolved enforcement actions.

Step 5 — Payment chain, subcontractor lists, and lien risk

Get a complete list of subcontractors and suppliers up front, plus their contact info.
Include clause requiring the contractor to obtain lien waivers from subs and suppliers for every draw payment; never accept a verbal promise.
Consider an escrow arrangement for large repairs so funds are disbursed only on inspection-confirmed milestones and verified lien waivers.

Step 6 — Permits, inspections, and code compliance

Confirm the contractor will pull all required permits and close them out with the municipality. Ask for permit numbers and verification of final inspections in writing.
Keep copies of all inspection reports and final permit certificates. Buyers and title companies will want these at closing.

Step 7 — Contract terms every seller should insist on

Use a written, signed contract that includes:

Clear scope of work, line-item pricing, and detailed specs for materials and brands.
A payment schedule tied to milestones, inspections, and lien-waiver delivery.
No assignment of benefits (AOB) without your explicit approval — and if an AOB is used, limit what can be assigned and require your written consent for assignment transfers.
Warranty terms and remedies for defective work.
A clause requiring the contractor to maintain insurance and provide COIs naming you and the title company as additional insured where appropriate.
Retention clause: hold back a reasonable percentage (commonly 5–10%) until final inspection and lien releases.
Representations that the contractor has paid all subs and suppliers to date, with immediate obligation to cure any unpaid claims.

Red flags sellers can’t ignore

Cash-only requests: If a vendor demands large cash payments, walk away. Cash-only often hides tax, insurance, or lien issues.
Reluctance to provide a license number or COI: Legitimate businesses will readily share these details and let you verify them.
Multiple names or rapid company name changes: Businesses that frequently change names may be avoiding negative public records or judgments.
Pressure to sign an assignment of benefits: Assigning claims can speed payouts, but assignments have been linked to fraud and litigation. Never sign without attorney review.
Unwillingness to list subs or provide lien waivers: This increases your risk of mechanic’s liens which can derail sales.
Repeated negative themes in complaints: Nonpayment of subs, poor workmanship, lack of permit pulls, or insurance-footballing (claim denial) are systemic red flags.

“A single contractor mistake can impose a lien or title issue that follows a property for years. Vetting is not optional — it’s your closing insurance.”

How past misconduct complicates a sale — practical scenarios

1. Tax or criminal judgments attach to property proceeds

If a vendor has unpaid federal or state taxes and a judgment names the business owner personally, creditors can file liens or levy recovery against assets. The 2026 Rhode Island sentencing for tax evasion illustrates the scale: courts can order restitution and penalties that create public records and judgments. Buyers and title companies will notice judgment liens and may refuse to insure title until cleared.

2. Mechanic’s liens from unpaid subcontractors

Even if you paid the general contractor, subs and suppliers can file mechanic’s liens if not paid. These liens cloud title and must be resolved before sale or negotiated at closing, often reducing net proceeds or delaying closing by weeks.

3. Insurance claim disputes tied to questionable adjusters

Public adjusters who misrepresent damage, double-bill, or sign problematic AOBs can trigger insurer investigations or denials. If a lender or buyer sees an unresolved claim dispute, they may demand resolution or walk away.

4. Unpermitted work and certificate-of-occupancy problems

Unpermitted repairs can cause buyers’ appraisers and lenders to lower valuations or require corrective permits. Municipalities can order work to be torn down or retrofitted, and buyers often insist on permits closed as a condition of purchase.

Advanced strategies for risk-averse sellers (2026 updates)

Use these modern approaches to strengthen your position:

Leverage license-verification APIs and AI tools: In 2026 many state boards and private vendors offer API lookups and automated background screens that can flag suspended licenses or recent complaints in real time. Use them before hiring.
Escrowed repair funds: Open an escrow account managed by an attorney or title company so funds are disbursed based on verifiable inspections and lien-waiver delivery.
Independent third-party estimate: Get an independent estimator or licensed inspector to document scope and costs. This reduces the chance of padded invoices and gives buyers confidence later.
Title company pre-clearance: Ask your title company to run a pre-closing search for liens or judgments related to vendors listed in your contract.
Require subcontractor indemnity: Contractually obligate the general contractor to indemnify you for subs’ claims and to resolve any liens within a fixed timeframe.
Document everything: Upload photos, invoices, permits, inspection reports, and COIs to a secure, shareable folder tied to the listing. Transparency shortens escrow and builds buyer trust.

Who to call when you find a problem

A real estate attorney who handles construction and title issues — they can draft protective contract language and negotiate lien releases.
A title company to run focused searches and advise on curing liens before listing.
A state insurance regulator if you suspect the public adjuster committed fraud or filed erroneous claim paperwork.
A local building official for permit verification and code compliance concerns.

Sample phone script: questions to ask a public adjuster or contractor

“Can you give me your state license number and the name on the license?”
“Who is your insurance carrier? May I call to verify the COI?”
“Please provide three recent homeowner references with projects like mine and a list of subcontractors.”
“Will you pull all permits and provide copies of final inspection reports?”
“Do you use assignment of benefits? If so, what protections can you include for the homeowner?”
“Do you provide lien waivers for each payment? Will you sign a contract with a retention clause?”

Final checklist before you list

Complete license verifications for all vendors.
Obtain COIs and bond verification.
Run county recorder searches for liens and judgments tied to vendor names.
Confirm all permits are final and inspections passed.
Secure signed lien waivers for work already completed.
Ensure the contractor or adjuster has no unresolved enforcement orders or major consumer complaints.
Keep an escrow or retention on funds until final releases and permit closures.
Provide a buyer-ready folder with permits, invoices, warranties, and COIs.

Parting advice — protect your sale and your proceeds

Vetting is the seller’s first line of defense against delays, reduced offers, and legal entanglements. In 2026, with regulators taking stronger action and fraud schemes more sophisticated, the cost of skipping this work can far exceed the time and small expense of proper checks. Think of vetting as pre-closing insurance: it prevents surprises that cost you time, money, and your buyer.

If you’ve already worked with a vendor you now suspect is problematic, act quickly: order title and lien searches, notify your title company and lender, and consult a real estate attorney. Quick action often contains the damage and preserves your ability to close on schedule.

Need help vetting vendors or closing a storm-damaged sale?

We help sellers prepare properties for fast, clean closings after storm damage. Download our free vendor-vetting checklist, or contact a local real estate attorney and title company to run immediate searches. Protect your sale before you sign — your net proceeds and closing date depend on it.

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