Are You Getting An Estimate, A Quote, Or A Bid?
If you’re a typical homeowner who’s eying a renovation, you’ve solicited “estimates” from contractors. Unfortunately, an estimate is an imprecise word that seems to generate confusion. Is an estimate a “bid”? Is it a “final quote”? There can be a huge difference between what homeowners think they’re getting when they receive estimates for their projects and what they’re actually getting.
Confusion over these terms is a big problem in the remodeling experience. Let’s see if we can shed some light on this situation…
Defining Our Terms: Estimates, Quotes, and Bids
One of the big challenges for remodeling contractors when working with homeowners is that contractors almost never have the project completely detailed out in terms of fixtures and finishes from the outset. This can make a great deal of difference in the ultimate, actual cost of the project.
Homeowners think they’re getting solid, empirical numbers, while the remodelers think they’re providing rough approximations that will likely change. The result is often frustration, loss of projects at the last minute, and a lot of wasted time for both the homeowner and the contractor.
So let’s put in plain English what each term means:
An estimate is just what it sounds like: the contractor estimates, or makes a rough initial approximation of what your project will cost based on an educated guess of the labor and material costs. The initial estimates are useful for establishing a price range for getting the job done and perhaps for you setting a realistic budget.
An estimate may be verbal or in writing, but is not considered legally binding in most cases and may not include taxes, overhead equipment costs, or other final costs. Most consumers are relatively comfortable with this word as it’s used in numerous industries, from car repair to plumbing.
A quote is a detailed, written breakdown of the costs of a project that can be signed and used as a contract. It typically expires after a certain window, such as one month, because the prices for materials included are subject to variation in the market. Think of a quote as the finalization of an estimate with more detail that is non-negotiable. Because it is more detailed, an accurate quote isn’t possible until all the design details and selections are ironed out between the contractor and homeowner.
A bid is where things get murky; many residential contractors use the term interchangeably with “estimate” (and, confusingly, even with “quote”). When the term “bidding” is used in other industries and settings–even in commercial construction–it refers to a fixed price that a company offers to accept for a fixed amount of work. However, when contractors use it in residential construction, it isn’t meant to imply the price will never change. It’s more like industry slang that captures the essence of the competition among contractors for the work, but doesn’t accurately portray the pricing process.
So, for our purposes, we will stick to using just “estimate” and “quote.”
Types of Contractor Pricing Offers
|Is it firm?||No, prices likely to change||Yes, but for only a limited time|
|Detail level||Low, includes inputs that may change||Medium, with some but not all details on the project|
|Can you negotiate?||Yes, throughout the project||No|
How Just Choosing the Lowest Estimate Can Backfire
Remodelers are regularly engaged to look at projects that are still in their infancy stages.
For example, let’s say a homeowner wants to do a kitchen remodel: during my first visit it’s rare that the homeowner has his granite countertop, backsplash tile, plumbing fixtures, flooring selections, and cabinetry all picked out already.
Yet, he expects to get an estimate from me.
All I can do is give him lots of different estimates–which isn’t very helpful for him–because there are countless ways to fill in all the blanks on the project.
Unscrupulous companies will capitalize on this lack of clarity by offering a low estimate and surprising the homeowner later with change orders to add all the things that weren’t in the estimate initially.
The challenging part for the homeowner is that remodelers often call these early estimates “bids,” but they’re not a reliable indicator of which remodeler will provide the best final value.
So the homeowner often gets stuck paying more than he would have if he’d taken a more complete quote from a reputable company, even at a higher initial price.
Pricing a Remodeling Project Is a Fuid Process
For the sake of transparency, a reputable company will use allowances and disclaimers to make it clear to the homeowner that their estimate may not represent the total price of the project.
Even when working with a reputable contractor, the quoted price can be higher than the original estimate.
This is because developing the price of a remodeling project is a fluid process for remodelers.
As more and more specific decisions are made during the development of the project, the cost tends to go up from the initial “ballpark” cost given by the contractors.
The estimate involves the contractor making assumptions about your taste in finishes and quality and it isn’t until later that the specifics can be known and priced out with certainty.
This is something known in the industry as “scope creep”–the tendency for projects to increase in size and scope as they go along.
If you build this expectation into your cost from the very beginning, you’ll be prepared and won’t experience the frustration that’s too often part of the process of getting remodeling estimates.
How to Get an Accurate Estimate?
Here are the best ways to get a firm idea of what the price range for the project will be:
Choose a Contractor That’s Friendly, Honest, and Upfront
Homeowners are notoriously reticent to talk about budget, but it’s much more efficient when working with a design-builder to share ideas about budget from the very beginning. To do this you need to find a contractor you trust and are comfortable with.
“How to Find a Good Contractor” is the subject of another article that you can find below.
Our Contractor Test helps you identify reliable and trustworthy contractors.
The goal is to get all the design details and selections pinned down as specifically as possible so your contractor can give you the price for the job that you really want to get done–one that won’t change unless you ask for changes.
At Legal Eagle Contractors, we are open and honest about pricing at every stage of the process.
We’re interested in working with homeowners who are armed with all the information they need so that their expectations are realistic and we can maintain an amicable relationship from beginning to end.