home estimates

How should homeowners interpret estimates?

Almost all home improvement projects are restricted by cost, which is why homeowners ask for estimates. With these pricing assessments, professionals and their clients can come to an agreement on the approximate budget for a specific project.

Estimates include labor costs and part costs, but they can also provide a projection of how long a job will take.Understanding how to interpret an estimate can help you compare professionals and get the most out of your home improvement dollar.

Why We’re Asking:

For the same project, rates can vary greatly between professionals. This disparity can leave homeowners wondering how to evaluate estimates so they get the best work done at the lowest price possible.

Our home improvement experts rely on their ability to approximate cost to attract new clients, plan budgets and manage projects effectively. To find out how to decipher home improvement project estimates, we’re asking our panel of experts.

So experts, it’s time to weigh in:

How should homeowners interpret estimates?

For all contractors, designers and home improvement professionals, how accurate are estimates?
Do most professionals shoot high and try to come in under budget?
Should a homeowner expect projects to come in on budget or just near the budget?
How should homeowners interpret differences between professional estimates?

For realtors, how are appraisals like estimates? And, how do they relate to asking price?

For green experts, how accurately can you estimate energy savings when recommending or installing an energy efficient upgrade?

Experts, post your answers in the comment field below!



  • Kraig Kalashian 01/30/12

    The biggest problem that I’ve seen when people hire design professionals is that the professionals don’t assume any responsibility for the budget. There needs to be some language in the proposal where the professional agrees to take ownership of the project cost. If the professional designs something that exceeds the project cost, they should be liable to re-design it at their expense.

    The best way to avoid this type of situation as a client is to state your goals and expectations up front. After that, you can verify that those same goals and expectations are in the proposal. These would include budget, schedule, personal design preferences, sustainability, etc.. If an Architect or Designer isn’t willing to design around your priorities then they are probably not the best fit for you as a client. Also beware of designers who will only work hourly. A good designer or Architect should have enough project experience to know how long things will take and stick to a set of established values.

    • Nancy Dalton 02/03/12

      Kraig,

      I understand what you saying. I own a design/build firm that specializes in kitchens and baths. My advise is to work with someone competent, licensed and insured to providing the correct information. Also find a professional that does the type of work you’re looking for on a regular basis. Budgets that don’t take into account all the work (labor and materials) needed usually don’t have really good specifications either.

      Homeowners also need to understand that there can be unforseen conditions. These should be limited to things you couldn’t have known and couldn’t have been determined. A good example would be that you open up a wall and a previous homeowner or builder did unsafe or incorrect plumbing, electrical or framing.

      If you’re talking about sofa’s that won’t fit through a doorway, or it’s twice the price quoted; there’s no excuse.

  • Linda Benninger @ Atlanta Plumbing Plus 01/30/12

    Homeowners should ask their contractors if this is a rough estimate or a firm quote. If they want a firm quote, they need to be very specific in describing the work they want to have done. They should spell out which materials they want to provide themselves, and which materials they want their contractor to provide. Then, they should ask their contractor for a firm quote, in writing, with a statement of how long the quote is good for (e.g. 30 days or 90 days).

    I always insist that my plumbers get a clear understanding of the scope of work and job responsibilities from the customer. We then give the customer a firm quote based on that information. If the customer doesn’t change the scope of work or job responsibilities, we don’t change our pricing. On the very rare occasion when one of our plumbers miss-quotes and the job costs more than quoted, then we have to eat the cost. We don’t pass that cost on to the customer because it’s not the customer’s fault we miss-quoted. If the customer changes the scope of work, however, then we let the customer know what the new cost will before we continue on with the project. This gives the customer the opportunity to decide whether the requested changes are worth the additional cost or not. There should be no surprises at the end of the job if everyone communicates clearly throughout the process.

  • Alan Hilsabeck Jr 01/30/12

    This is an age old question with several answers. The answer I am going to provide is one that has been tried and true for the past 20 years as a Design professional. Overall, no matter whether the project is Commercial or Residential, one should always get a minimum of three bids. The reason for this is that it will establish, on average, a High, Middle, and Low bid.

    In theory, one should always select the Lowest bid; however, not is always the case. When it comes to homeowners and the project(s) they are inquiring to begin, it is more about the Relationship between the Homeowner and the Designer, Contractor or Design-Build firm they are interviewing that should take a higher precedence. Yes, the person or firm that “fits” the best should have all the items listed and expectations set from the beginning prior to making the final decision on who to hire, no matter whether they represent the Low, Middle, or High bid.

    The main items I would recommend for homeowners to make sure are covered are as follows: 1. Professionalism 2. A good Listener 3. References. Anyone can have a “Squeaky Clean” resume or a fancy website and “hide behind” Smoke and Mirrors. It is the three things I listed that if passed, make for a person or firm that you want to do business with. In the end, the actual Estimates created are merely a representation of the physical things that are going to naturally vary by a few dollars here and there, but it is the non-physical things that should be used in the comparison and interpretation of the estimates that counts most.

    Remember, once Construction begins, it will be the person you choose that will be having coffee with you every morning for the duration of the project, not always the one who provides the lowest bid.

  • Sam Lazarus @ ServiceMaster by Best 01/30/12

    Estimate: As defined by Merriam-Webster “to produce a statement of the approximate cost of” [among other things]. My approach to giving an estimate is as if I were the customer. As a customer when someone tells me they estimate the cost to be $500 to finish project x, I take it at that. If the vendor puts it on paper titled “Estimate”, $500 to complete project x; I read it as based on any unforeseen things, it will be $500.00 to finish that project. If there are caveats of unforeseeable expenses, than I expect that discussion to happen during the “estimating” process. When I give an “estimate” to the client, I let them know that this is only an estimate based on the scope of work described in the estimate. Should other things arise, charges will be additional based on what arises. Being in the cleaning and restoration business, to give an “estimate” to clean a carpet or air-duct is rather simple. We are upfront with “based on the information you provided, we estimate the cost of x to be $ Y. If our technicians arrive at the site and notice the scope of work outlined is different than on the work order, they are to call the office staff and expectations corrected. Based on what is necessary charges may change and we communicate with the client before services commence. How one communicates the word “estimate” is crucial to what a person may hear.

    When a client asks for a bid on a certain project, it is generally do not exceed bid number that we give for the services requested and outlined in the bid.

    Should a client want a proposal on what needs to be done, we discuss that and “propose” things that need to be cleaned and restored. They may want something different than what we are proposing, we will create a bid based on the fine-tuning of the proposal.

    When we perform restoration services, [unless a client is paying out of pocket], we use and industry-wide internet based software that has a initial day estimate, but by the end of the job will have a final billing.

    Call it estimate/bid or proposal, communicating with the client and setting expectations of service is the key. Over communicate with all parties involved, under promise and over deliver.

  • Kerry Ann Dame @ Posh Living 01/30/12

    Since the results of an interior design project vary greatly between one designer and another, it is important for the client to make sure they are doing an “apples to apples” comparison when they get a quote, especially for furniture and windows. Quality varies so much from one manufacturer to another, it is critical to check the specs on the order. One sofa may be a bit more expensive than another, but the designer should be able to spell out the type of construction and durability of the frame and fabric, so the client has a realistic expectation of how well each sofa will perform over time, and can then decide according to their budget. With window treatments, again one must examine the specifics – is the main fabric more expensive? Are they lined? Will they close for privacy or are they just decorative side panels? There is also a big difference in the smooth performance of drapery rods – heavy drapes require better rods to avoid jamming. A professional will have all of the details for each product they show you, and offer a couple of different choices for your budget.

    It is unrealistic to expect a designer to “quote” a complete job and itemize every item in the room in order to “bid” on a job. The work involved in just producing the quote is actually half of the design process – it takes hours and hours to calculate all of the measurements and price all of the individual bits and pieces for a job such as a furniture plan or large drapery. Once a client has been given a quote, it is easy for them to ask another professional to “beat it”, which they often will because the first designer already did most of the legwork, measuring and calculating and producing the written budget. That is why most designers charge a fee for large window treatment and furniture designs, especially if the client wants the quote in writing.

    If you have an ongoing relationship with a designer, you can avoid fees by agreeing to purchase most everything from the designer’s shop. This is cost effective on projects that involve large purchases, as fees are included. However, any experienced designer should be able to tell you what amount to budget based on what you are trying to accomplish.

    There are so many factors to consider when hiring your designer – mutual comfort with the budget, comfort with each other, and good communication are as important as the client’s liking the designer’s work.

    Once we give a quote at Posh Living, it does not change unless an element of the job changes, i.e. something is unavailable and the client has to choose a substitute, or the scope of work is increased once the project begins. On some projects, we work purely on an hourly basis because the scope of the work is uncertain, especially in construction and renovation. Billing hourly on these projects can actually save the client money, since the ones that go smoothly take less of the designer’s time. As long as there is understanding at the beginning about the estimating and billing process, designers can make sure they are being paid fairly for their input.

  • Greg Chick @ Ramonas Plumber 01/30/12

    Estimates are free, I give them over the phone. Any price after I arrive at the job is a contract price. People don’t want estimates, they want you to come for free and give them ideas and free advice. If what a customer wants is something for free, they should expect very little. If I sound gruff, sorry, this is honest and what you get from me. Honestly free, I can do an Audit, and I will give you an exact price for that on the phone. I can do a design, and I can charge you a base price and an hourly rate for changes that you make. Ask yourself what do you want to spend? I do not posture, or sell, or bait n switch. I am a Professional, I offer references, one can see my past work, my lack of ever being sued or Bankruptcy in 35 plus yrs. Personally, I think “Estimates” are trouble. Estimates are “Guesses” that are made by people who do not know enough about what they are looking at. Might I offer a sure way to be happy, give a maximum price for a job and a minimum price for the job. The break down of what is unknown, and the price increments for each pound, or foot, or item as such it be.

    Estimates are for trouble.

  • Tracy Metro @ Home Made Simple, The OWN Network 01/30/12

    You know how comedians do one-liners? I think that’s what I’m going to do this week. Keeping it SIMPLE like I do when designing and building rooms on Oprah Winfrey Network’s show Home Made Simple.

    How Accurate are estimates? To be honest, estimates are as accurate as YOU are at explaining what you want accomplished. The reason many projects come in over budget is because the scope changes. Don’t change it and the budget won’t change… Especially, if that’s what your contract says! Put it in writing and it WON’T change!

    Do most professionals shoot high and try to come in under budget? Most SMART professionals come in ON budget or 5% under/over. Nobody died over 5 %… For god’s sake, that’s less than tax in California!

    How should homeowners interpret differences between professional estimates? A true pro will give you an itemized budget and then have a line item for cushion or overage. That cushion is typically 20%. When comparing designer to designer, see if and who has a line item for overage. If one does not, I might be suspicious of their estimate as NOBODY can get it down to the penny. It’s simply impossible which is WHY there is an overage line item.

    Tracy’s Tip: Get it ALL in writing before you start. Set milestone payments. Give the incentive of a 2%-5% payment bump if they come in under budget and/or early. Time is money, after all.

  • Grand View Builders 01/31/12

    Although every home buyer intends on building their perfect dream home, it is extremely important to stick with estimates. The professional designers in our design center are very precise when helping buyers stick to their budgets, and will make sure that they do not go over. If they end up with a toe on the line it is absolutely necessary to communicate this to the buyer in order for there to be no monetary surprises. With any large investment, it is easy to get carried away, but the customer plans a budget for a reason.

    Additionally, green savings through established, reliable technologies – such as those employed in all Grand View Builders Houses through Energy Star – are a great way to lower your energy costs. As one example, effective insulation will ensure even home temperatures, and along with tight construction and ducts will work to reduce your energy bill.

  • Kris @ HouseBuying-Tips 01/31/12

    When people think of estimates they usually think about the cost of the project. Of course, you need to know how much a project will cost and make sure it fits into your budget. But the process of obtaining estimates can give you a lot more information than just the cost.

    First, you need to get more than one estimate. Any single contractor can cost a lot more or a lot less than any others. So ideally you want 3-4 so you can compare. If one contractor comes in way less than all the rest, does this mean you will be getting a bargain? Or will you be getting what you pay for? With nothing to compare to you would never know.

    Second, the process of obtaining estimates can tell you a lot about the contractor. Do they actually answer the phone when you call? If not, do they return your call promptly? Do they show up on time for the estimate? Do they follow up in a reasonable amount of time? Does the estimate give you details about the entire project or just a price? Is it written on professional letterhead or a piece of scrap paper? There are not necessarily right or wrong answers, but you’ll learn a lot about who you want to hire – and who you don’t – by going through the process of getting estimates.

    Third, you’ll learn a lot about the little details of construction in general, and your project in particular. A good contractor will ask lots of questions, some you didn’t even think of. And they’ll all ask slightly different questions. So if you decide to hire the first contractor you meet with, you may need to have a second discussion to go over some of those details you learned about from the second or third estimates.

    Sure, getting several estimates can be a pain in the neck, especially when contractors don’t show up when they say the will. But you will learn so much more about your projects and the contractors when you get several estimates. So do yourself a big favor and get a few before you make your final decision.

  • Duane Draughon @ Paverstone Design Group 02/01/12

    As a professional home improvement contractor we price our projects with all materials, labor, and profit. We don’t try to under cut the market or over price the jobs just to turn around and give a discount if they buy today. It would be nice but we felt that’s not the way to do it. I would say the number one issue we have with potential prospects is like for like. Home owners not understanding what is being presented. I wouldn’t buy a $400,000 to $700,000 home then call the cheapest company to work on it. They spend less money on their cars but will not take them to the backyard mechanic. I find it truly amazing that people would do that.

    When viewing an estimate they should take all things in consideration.
    1. Is the scope of the work spelled out or designed properly.

    2. Do they have all materials quoted and what extras would in the event the contractor under bid the project. We see this issue a lot. Companies price only by square foot an not materials can run short on the gravel, sand, edging, etc. because they are not factoring the environment of the job. They could be working on an incline or not have machine access.

    3. What are the warranties and do they sound reasonable for the industry. We see operations say they have a 10 to 20 year warranty but haven’t been in business for any longer than a year.

    4. STOP BUYING on cost, cheap work means poor customer service, cheap materials, or poor craftsmanship. Something is going to lack if the contractor is below market value.

    5. Understand that the estimated price goes further than the project. Meaning the money made at the job pays the bills to keep the company in business for extra work or repair services through the years to come. Nothing constructed by man will last forever unless it’s the pyramids in Egypt and they used solid granite. One block today would be more than someones home.

    6. Look over the quality of material estimated. I see this a lot. A company has a cheaper price but they used xyz pavers for the job. xyz pavers will fall about in a few years.

    7. Is it an estimate or a design you are looking for? These areas are two different things. Our company prides itself on the design of the project, so we can be a little more extensive in that process. While xyz competitor is just giving the basics. When it is build is it going to be the right size for your needs. Like furniture placement, traffic movement, and compliment the property for future resale.

  • Nancy Dalton @ Baywolf Dalton 02/01/12

    It’s important to understand the difference between an estimate and a firm quotation. In either case you need to know you are dealing with a professional, reputable and licensed company to do any work on your home. The cost of the project needs to be directly tied to specifications; what is included, what isn’t and what unforeseen condition could potentially come up.

    As a general contractor and designer; l remodel homes and specialize in kitchens and baths. I write detailed labor and materials specifications. These specifications are based on a budget for the project; my design work and the client’s level of quality. You need to be very clear with contractors and sub-contractors regarding the level of quality of the materials used, work schedule, and clean-up for an accurate quote. Be prepared with pictures and manufacturers of products you would like included.

    Whether it’s a kitchen or a driveway; have some idea regarding how you envision the finished project. I am currently adding a new driveway to our home and the finish details, the excavation (who takes the dirt away and is it included?); all of this matters. Good estimates come down to good communication and reputable companies, because they want your referrals and future business. A poorly written estimate that doesn’t spell out what you have requested is a sign you should avoid that company. The estimate should also include: time line with a start date; payment schedule; license and bonding information and their warranty for the work and materials. For complicated projects; drawings, product information and model numbers need to be included.

    Complicated projects that require drawings you can’t provide and specifications as a homeowner you may not be able to write will probably come with a cost to provide a proposal. At the point a tile contractor or general contractor is doing drawings and writing spec’s you may want to consider a designer or architect so you can provide this information uniformly too all bidders so you can compare apples to apples.

  • Lindsey @ Unique Home Solutions 02/01/12

    There is so much more to an estimate that simply getting a price. Our in-home consultants first evaluate the home by taking measurements, looking for trouble areas and testing the current product for areas of weakness. If they notice deterioration or product failure, they will point this out to the homeowner.

    Next they sit down with the customer and explore the customer’s needs and wants. Many customers aren’t aware of their options, while others, who have done their homework, have very valuable questions to ask. No matter the stage the customer is in, the in-home consultant is there to educate the customer and help them feel at ease about their upcoming project.

    The in-home consultant then allows the customer to evaluate the products and services we have to offer. They give a full demonstration of our products, cover installation processes, warranties, and most importantly, they let the customer know who we are as a company and what we stand for. There are too many fly-by-night companies around, we want to let the customer know that we are a trusted contractor.

    Finally, we offer our best suggestions and if they like what they see we offer a price.

    Obviously the price is a very important part of the estimate, but there is so much more than just price given during the consultation.

  • Jody Costello @ Contractors From Hell 02/01/12

    For homeowners, interpreting and comparing estimates is the biggest challenge they face because more often than not, they have no idea what’s really included in those estimates. They make assumptions based on a lack of knowledge on how each contractor is bidding out the project, if they are including materials, specific scope of work summary followed by a detailed spec sheet.

    Unfortunately, these are grey areas to a homeowner who will skim over important details – or lack there of – and get to the bottom line pricing. Which, should they go with that alone will surely get them in trouble when they discover work or materials expected aren’t in the bid and change orders begin flying. A common mistake made by consumers and the change order game played by unethical contractors who deliver low-ball bids.

    With proposals, it’s necessary to conduct an exhaustive proposal review to ensure the proposals actually have apple-to-apple information. Proposals that are not clear, complete and uniform cannot be compared. Period. The price of a proposal has no meaning if you don’t know what’s included. And therein lies the problem; homeowners more often than not, simply don’t take the time needed to do this.

    With due diligence though, a homeowner who spends the time to review and ask questions about differences, making sure the contractors’ quote has everything included, comparing line items against each bid will only help the homeowner better understand what’s being presented. One of the best ways I’ve seen so far is a template that breaks down the scope of work (backed with the specs) for a project where the homeowner plugs in the work, provides that to the contractor along with spec sheet, scope of work and drawings and the contractors use that to fill in costs for materials, labor and their cost to perform which includes their overhead and profit. When they get it back they can more easily see and compare items line by line across all bids.

    This is where differences will stand out, can and should be questioned to determine if the contractor is bidding correctly, understands what he’s bidding on and also to uncover any missing information another contractor may pick up on. Then too, those contractors who conduct ethical businesses, carry insurance and have a staff to manage projects properly will have higher costs compared to a one man operation. And this is important because a homeowner has to consider the work ethics, professionalism and the ability of the contractor to produce quality workmanship, problem solve and respond to concerns that arise and back it up should something go wrong. Challenges will arise but it’s the true professional that can confidently deal with them and with success. That’s the kind of contractor a homeowner should look for and it begins with evaluating bids/proposals and asking lot’s questions.

  • Dawn Ohnstad 02/01/12

    How is an appraisal like an estimate??? It is funny you ask that question, because actually, there was once a seller my husband (Realtor/partner) had who said that he was not choosing to use my husband’s real estate services because his “bid” was lower than the other agent’s…

    This is the sad fact..lots of people selling their homes think that we, when giving price opinions, are “bidding” on their house, and that the higher the recommended listing price, the higher the amount they will get for the house. This misguided logic then tells them to select the agent who has told them the highest number.

    This is called “buying the listing” folks. Some agents will tell a seller anything they need to in order to secure the listing. Doing this, in fact harms the seller as statistics have proven that starting out a listing overpriced actually causes the home to sell for less than it would have had it been priced correctly at the outset. Homes get the most interest in the first 2-4 weeks on market, so why would you want to price it right after the interest has gone to its lowest?

    So, here is the wisdom I can give you, whether talking with Realtors about price opinions on your house, or getting “estimates” from contractors for a planned project, select a professional with a strong reputation for high standards of conduct and great results. Talk to others who have done business with them and were more than satisfied. Then trust that you are in good hands, follow their counsel, let them do their work and pay them what they are worth.

    It is that simple. Really.

  • Steve Robinson @ Axios Architecture 02/02/12

    I’m an architect that does new houses and renovations that typically involve significant changes to the home…so I am not talking about simpler projects like repairs, drapes, fittings, etc. but actual rearranging/adding space and the like. A few rules will help in understanding what an “estimate” is telling you.

    Rule 1: Be realistic in your expectations. Design and construction are fairly complicated if there is any significant work involved. “What should this cost?” sounds like a simple question, but there are literally hundreds of variables in play. Understand that and you will be much smarter about reviewing estimates.

    Rule 2: Contractors are not mind readers. Don’t complain that a contractor “missed” something that isn’t clear. The classic example is constructing a sizeable rear addition and a homeowner assumed the contractor was going to repaint the entire house because it clearly needed it.

    Rule 3: Understand allowances. I can take any line item in an estimate and legitimately vary its cost significantly. Do you want the $75 faucet or the $750 model? Do you want the good, contractor grade of windows at $15,000 or the higher performing window with divided lights for $40,000? What about railings? What about light fixtures? A big one is what about mechanical systems? Contractors have to make reasonable guesses (and they are incentivized to guess low), so understand that.

    Rule 4: Give yourself a contingency. Until you have detailed specs and drawings, an estimate is still fuzzy around the edges. On my projects, the homeowner wants/needs a lot of price certainty early in design, but the detailed information isn’t there yet. Hold a contingency for yourself to address inevitable changes in value as more detail is defined.

    Rule 5: Get a good architect!

  • Jason Todd @ GreenHomes America 02/02/12

    It has been said here already, estimates are free. And by their nature, estimates are guesses. So an estimate could be seen as something with no value based on a guess. That’s not what I want when considering an improvement on my home.

    A homeowner should base important decisions about their home, armed with as much information as possible. A solid proposal comes from a solid assessment of the home’s current condition and how it should be improved. Not often free, but very worthwhile.

    When we start looking at estimated savings in energy modeling, it is still a guess, although an educated one. Energy modeling gets complicated very quickly. The variables that affect results include things like weather and occupant behavior. Even with significant energy savings measures, a homeowner might not see the savings the following year if it’s an extreme season for heating or cooling or if the crank up the thermostat even with efficiency improvements. In reality of course without the improvements they would have spent even more for that year!

    Greater accuracy can be obtained with estimating savings, but we try and steer clear of creating research projects out of people’s homes. We focus our time on creating solutions to high energy bills, discomfort or health and safety concerns. When we provide a proposal for work to be done, the homeowner sees what it will cost as well as what will happen, that doesn’t change once the work starts.

  • Gloria Shulman @ Centek Capital 02/02/12

    Appraisals are negatively impacting real estate sales because of oppressive federal regulations. Regulators have adopted a “one size fits all” approach that has forced appraisers to estimate home values in areas where they have limited working knowledge, As a result, appraisers are calculating short-sales and foreclosures as “part of the norm’ in neighborhoods where home values should he higher.

    This is negatively impacting the refinance market too. With a bad appraisal, consumers are paying higher rates and additional closing costs. The best defense for appraisal regulations is due diligence. It’s critical to stay on top of favorable real estate transactions in your area so your asking price reflects a “best-estimate” versus a low-ball appraisal.

  • Patricia Davis Brown 02/03/12

    The first person a homeowner needs to hire before beginning their project is the design professional that will develop the plans and write the specifications. This is your best friend to have before you begin the estimating process. Without complete plans of the project know things will be left out. Let me give you an example; if you are specifying granite countertops it is important to specify the exact type of granite because there are three different price levels. Without written specifications you do not know if the contractor pricing it is going for the least expensive or the most. Also, without a plan of the countertops you do not know where the fabricator is putting the seams. You could end up with left over materials that are pieced together and having many seams. The price would be less but, do you really want a countertop full of seams? This is just one example and if you multiply it for every product you will have on your job there could be many change orders to get it right. The point is without a plan of the project and complete written specifications you do not have any idea of what your job will cost.

  • Pablo Solomon 02/03/12

    Four quick points–

    First–do not confuse a rough estimate with a contract that spells everything out in detail and has set standards and costs.
    Second–the more detailed the estimate, the more likely it is to be accurate.
    Third–Understand up front that when you make changes as the project progresses, those changes will usually cost you extra money.
    Fourth–Quality is always the best value.

  • Terry Peterman @ Electrical Online 02/03/12

    When I was in the contracting business, this was always the biggest challenge (other than collecting receivables) I faced as the owner of the company. I believe that people just want to be treated fairly, and in keeping with the Golden Rule, do on to others as you would have done to you.

    In the beginning it was me who was the initial contact, the one who looked at the scope of the work, and the one who did the job. This was much easier as I knew my capabilities, and my experience helped me to anticipate all the challenges that may come up during the job. If there was an issue or an oversight on my part, the buck stopped right here. I could either take a loss or negotiate with the customer to keep everyone happy.

    When the company grew, the margin for error expanded incrementally. Now the shop foreman was taking care of the estimating and depending on who the job was assigned to affected how close to the estimates or quotes that we could stay.

    Bottom line is that all I ever asked as a business owner was to have a successful operation, capable of paying my bills, my salaries, and hopefully having enough left at the end of the day to make the business profitable.

    We dealt with 2 main processes, one being the well-defined tendering process that was considerably more complex, yet fairly well defined, and the other being the informal estimates. New construction is much easier to estimate than renovation projects as you had a history and precedent to help in the calculations. I refused to give hard dollar quotes on a renovation. You just cannot know what is inside the walls, or how the project is going to go in advance without the benefit of a crystal ball. I tried to explain to my customers that it is going to cost whatever it takes to get the job done to their satisfaction. The cost will be the amount of time spent completing the work along with the cost of the materials used. If it took more time than expected, I expected them to pay the bill unless it was clear that extra time was some fault of ours. Likewise, if the job went better than my estimate, the customer only paid for the actual time and materials expended on the job.

    With a few exceptions, this philosophy made for happy customers, and a successful business.

  • Steve Sparhawk @ DeckTec Outdoor Design 02/03/12

    When getting a proposal from a contractor, ask what method they use in pricing jobs. A qualified contractor should have demonstrated experience in the type, size and quality of a project that you are interested in. With some basic information, they can approach estimating a few different ways:

    There is a historical estimate, which is based on the individual contractor’s actual experience with similar size and type of project. These estimates can be useful in checking or confirming the budget if your project is similar in size and complexity to the comparison project. We refer to it as “Lika estimating” – as in “this job is lika thata one.” It is important to consider how long ago the comparison project was completed, as well as any major factors that might create a discrepancy, such as material choices or unusual site conditions.

    Then there is a square foot estimate, which is based on a generic quantity and unit price. These estimates can be useful when the project is of a larger scale and basic in its design requirements. The estimates are usually not accurate for similar scale projects or where custom elements are desired. This is where most contractors in our industry tend to estimate projects from. The biggest problem with this type of estimate is that it often leads to inaccurate quotes because they are based from a very limited set of information.

    There is the labor estimate approach, where labor is assumed to be a certain percentage of the job and the pricing is marked up accordingly. This can be a slippery slope in estimating as labor can quickly become inflated, increasing the cost of your job. In the case that the labor is less, you are often left overpaying for what you got.

    Last there is a “stick built” pricing estimate. This estimate is the most accurate of the four. It requires a completed design that can be itemized in detail to determine precise quantities of materials and man-hours to accomplish your specific project. This is the approach we take as it is the most accurate, and almost always comes in on budget. Most changes to the job cost are because of changes made to the order, rather than an error in estimating.

    Make sure that when comparing estimates, it is apples to apples, and not apples to chickens. It is easy to see a bid from a contractor that, on first glance, seems 25-30% higher and dismiss their proposal as overpriced. However, go through the proposal to find the discrepancy. Oftentimes, you’ll discover it’s because the “overpriced” company is offering 25-30% more service. If you’re not sure, ask. In the end, you’ll be making an informed decision.

  • Modern Group 02/03/12

    Unfortunately, we have all heard horror stories about job estimates not being correct and home renovation plans gone wrong. Why is that?

    1. Contractors who are inexperienced may not take into account all of the job scope details. As a general contracting firm, there are multiple areas to take into consideration when submitting a home renovation price quote. All estimates are based on surveying, structural drawings, architectural drawings, permits, job specifications and all subcontractor bids. Subcontractor bids are the most important aspect to include in the total price estimate and budget plans.

    Subcontractors are broken into categories depending on the scope of the job. Each subcontractor submits their individual bid to the general contracting company that estimates the price for their service on the project. Subcontractor’s bids are based on material cost, labor cost, fuel cost, taxes (company and employee), permits that may be necessary, workman’s compensation and finally, profit.

    2. Another reason estimation and budget plans may be off are because the homeowners weren’t involved in the subcontracting selection process. Once the general contracting firm receives the bids from each subcontractor, they provide the homeowner the information. As a homeowner it is very important that your general contractor provides you with at least three subcontractor companies and their bids. As the homeowner, your input is important and affects the overall project price.

    With an experienced and credible contractor and with the homeowners actively involved in the bidding process, estimates should be spot on. Although there may be a few dollar amount differences between estimates, depending on how high a company’s profit percentage is, homeowners should expect the estimates to come extremely close to the budget.

  • Katie @ Roomations 02/03/12

    The first things homeowners have to realize is that there are difference between an estimate and a bid.

    Estimates made early in the project planning process are likely to be bit off from the actual cost of the project because not everything about the project is known. Estimates are useful for setting a project budget or steering a project in the right direction so that what you want to spend and what you end up spending are sort of in the same ballpark. A well prepared estimate can look pretty technical, making it seem like the number on the bottom line must be spot on. In reality, the bottom line number on the estimate is probably a little bit fuzzy, but its the best indication of price you have.

    Quotes are a little different from estimates, because a contractor will often give a quote hoping to get the work. If you are unsure about some of the details of the project, ask the contractor to give you a range of fee based on different assumptions. This will help you understand what is driving cost.

    Bids are the contractors actual fee to do the projects and should be based on detailed information about the scope of work. If an architect is involved in the project they can make sure all details are communicated to the bidding contractors so that all bids are based on exactly the same information. If you are getting bids without the help of an architect, you need to ask a lot of questions to confirm whether the fees you are comparing are in fact for the same thing.

    For example, if Painting Contractor #1 provides a fee for 1 coat of primer and 2 coats of Sherwin-Williams paint and Painting Contractor #2 gives you a fee for a single coat of a 2-in-1 paint plus primer from Behr, the second contractor will have a lower bid simply because there will be less labor time and the paint itself costs less. In fact, you have not gotten two competitive bids but two different projects. You need to decide which scope of work you want and then ask both contractors to submit a bid for the same thing. Then the contractors will really have to compete and you may find that Contractor #2 is just as expensive or more than Contractor #1.

    Bottom line: Ask questions, know what you are getting and only select the low bid when its for the same scope of work as the high bid.

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