Oh my, what a pickle. You really need to have a written contract for anything like this as it is very difficult to enforce a verbal contract. You don't have anything to go back to, not even a list of things to be done? Your realtor should not have gotten involved in a predicament like this as it smells. To protect themselves at a very minimum the agent should have demanded a written estimate be given to you and they should not have been the middleman for the contractor, taking money like that and giving it to the contractor. If I were a broker, I would want to know if one of my agents was involved in a project like this. As far as unethical, that would be an opinion, is the work being done as it should be? Is the agent giving all the money to the contractor or pocketing an undisclosed fee for acting as general contractor if that is what they are doing? I believe if the Realtor is acting as a general contractor, he should be licensed as a general contractor. Illegal? I don't know, you don't have a contract so it will end up being your word against theirs as far as what was expected for how much money. If I were in your shoes, I would first of all demand a written receipt as of today as to what has been done, what you have already paid for, what still needs to be done and how much that will cost. It is not unusual for contractors to have cost overruns or for a project to end up costing more than the original estimate, but the big problem is you really need to all be on the same page. This needs to be a written contract. Get something on paper and decide where you want to go after that. If you feel that the agent is being dishonest, you are able to file a complaint with the real estate board. You can also speak with the broker for the agent. The Realtor put himself in a position that he really shouldn't have as now his ethics are being questioned. I wish you well with this!