Contractor fraud is when individual contractors or firms engage in illegal practices when hired to repair, renovate or (re)build residential properties. It is also known as "home improvement scams". An example is a roofing contractor shows up at your door unannounced and proceeds to tell you that your roof has damage after a weather event. They offer to replace the roof at a low price, and state that your insurance company will pay for the roof replacement. The contractor then performs shoddy work or disappears, often after collecting a deposit from the unsuspecting consumer.

In Florida particularly, some contractors will take an "Assignment of Benefits" for the homeowner's insurance proceeds, and will file litigation if the insurer does not pay the inflated "cost of repairs". Such litigation has been rampant in Florida adding to an already increasing homeowners' insurance crisis in the state.

Contractor fraud also encompasses shoddy work, use of substandard materials, escalating the project costs, and over-billing. The consumer often ends up in many cases being defrauded twice because not only can they lose a significant amount to the fraudster, the inferior repair work can cause damage to previously undamaged part of the house, and a legitimate contractor will have to be hired to repair the shoddy workmanship or bring the home up to code. Fraud victims are frequently pressured into paying for the work through threats and intimidation.