When you’re considering a home improvement project, most experts suggest meeting at least three renovation contractors to get multiple contractor bids. This seems like a very reasonable suggestion, but often a problem arises when those bids come in.
Sometimes contractor estimates on the same project will vary significantly and it will be up to the homeowner to figure out why that’s the case. So, most people start by comparing the details of each bid to try and understand the cost difference. They’re trying to ensure that each contractor bid has the same elements so they can compare them in an apples-to-apples way. This is often a difficult task because most people don’t have enough experience in construction to know what to look for.
Here at GreatBuildz, we speak with clients every day who are comparing multiple estimates for a home renovation project. GreatBuildz is a free service that connects homeowners with reliable, pre-screened home contractors in Los Angeles, Orange & Ventura Counties, then provides ongoing project support to ensure a stress-free experience. In this blog, we’ll share some ideas and tips for comparing contractor bids that often look nothing alike.
Start With a Project Checklist
When you meet with contractors to walk them around your home and verbally discuss what you’d like to renovate or remodel, there are a few issues that can occur.
Each time you meet a contractor, you may say slightly different things based on what you remember to tell them. So, each contractor doesn’t get the same description of what you want to do. Even if you give each contractor the exact same verbal explanation of your project, each one of them will still walk away with their own subjective understanding of your needs, and indirectly the project requirements.
Therefore, it’s always best to create a written scope of your project to the best of your abilities; like a checklist of what should be included. Especially if you’re doing a large project, you’ll want to use a template to plan out your scope of work – like this ADU checklist if you’re considering building an accessory dwelling unit.
Once you hand this checklist to each contractor, they have a written guide to use when they create your bid. In addition, you can use your checklist to evaluate and compare contractor bids to see what’s missing or extra in each one.
Two Types of Bids: Early and Final
For people considering major home remodeling projects like an ADU, home addition, home reconfiguration, or anything that will require construction plans, they should understand that there are really two types of contractor estimates. There are preliminary (“rough”) estimates and detailed (“final”) estimates. Assuming a homeowner is meeting with a contractor early in their home improvement process before they start working on plans, many contractors will provide them with only a rough estimate. This estimate will not include a lot of detail but will give a general range of pricing they can expect.
Although some people are turned off by this because they want a thorough, detailed estimate, that is not always realistic. For one, the plans are not completed and therefore the contractor cannot know much of the details. Also, the client has probably not decided on any of their materials at this point. And lastly, the project might be many months away from starting, so material costs could change significantly. Other renovation contractors are willing to create a detailed estimate early in the process but explain to the customer that many items are subject to change.
If you have a reasonably simple project that doesn’t require plans, such as a bathroom or kitchen remodel, flooring, paint, etc. you should expect the contractor to provide a thorough, complete bid.
Why Do Two Bids Never Look the Same?
There is no consistent format for contractor bids, so every contractor will be using their own format. Plus, no two jobs are exactly the same, so every bid will be unique.
That makes it hard for the customer to understand whether the various estimates are comparable or not. For example, one contractor might have a line item called “Drywall” while another contractor might have more specifics like “Install drywall, tape, mud, texture & paint”. These two might mean exactly the same thing, but it’s hard to know whether the first one includes all those items or not.
Homeowners might conclude that the contractor who provides more detail in their estimate is the better contractor, but that’s not necessarily the case. So, the only way to determine what is and isn’t included in each bid is to ask each contractor to revise their bid with more specifics.
How Do I Compare Multiple Contractor Bids/Estimates?
When comparing contractor bids, start with the major categories of your remodel and make sure they are included in both. Things like foundation, framing, plumbing, electrical, drywall, paint, flooring, etc. Make sure that these large categories are at least mentioned or addressed in the bid to ensure none of the renovation contractors are missing a major portion of the remodel.
Next, start looking for differences in the bids from one another and make notes on which items aren’t lining up between estimates. For example, one contractor bid for a room addition might include insulation and the other doesn’t mention it. Or one bid for a kitchen remodel included “install appliances” but another one doesn’t have this line item.
Once you start this process, you’ll come up with a list of things that aren’t consistent among all your bids. You can then contact each remodeling contractor and provide a list of items that seems like it’s missing from their bid and have them add them or clarify that they’re included. Evaluating and comparing estimates is an iterative process and you may have to do several rounds of this until you have multiple bids that are “apples-to-apples”.
How to Factor in Project Material Costs
Although it’s obvious that labor is included in a contractor’s bid, it’s much less clear which materials are included. In most cases, general contractors include “rough” materials. These include things like concrete, lumber, screws, drywall, plumbing pipe, etc. And there is another category of materials called “finish” materials that will usually not be included because they depend on the customer’s selection for items like faucets, tile, door handles, light fixtures, etc.
One problem is that some items don’t neatly fall into one of these categories so they may or may not be included in a contractor’s estimate. Items like this include windows, flooring materials, bathroom vanity, paint, doors, recessed lights, etc. So, it’s extremely important to clarify which materials are paid for by the contractor versus the customer. Because every bid you get will have different material items included, you must factor that in before you can truly compare one price to another. You may see that one bid is significantly higher than another, but upon closer review, it could just include many more materials.
Even when you are dealing with materials that can clearly be defined as “finish” materials that need to be purchased or paid for by the homeowner, there is the issue of “allowances” that vary in each bid. An allowance is an amount the contractor has included in their price for this material item. So, if a contractor includes $1,000 in allowance for countertop material, regardless of your selection of material, they will cover the first $1000 and you will pay for the rest.
Because various contractor bids will have a different allowance or none at all for the various finish materials, you will need to reconcile this difference before being able to accurately compare the estimates.
Important Materials That Can Affect a Bid
There are a few important decisions about materials that can drastically affect your contractor bids. These are items like cabinetry, countertops, and flooring materials.
For example, in a kitchen remodel, a large portion of the cost is for the new kitchen cabinets. But you may get multiple bids where the line item for cabinetry cost is significantly different. This will largely be based on what kind of cabinets the contractor has included based on their understanding of the design you want.
Cabinets, even ones that look similar to each other, have a wide range of costs based on the material quality (different wood types, etc), where they are made, and most importantly whether they are custom or pre-fabricated. Countertops also come in pre-fabricated and custom varieties which are drastically different in price. You’ll have to ask each renovation contractor which style, type, and quality of the material they plan to use to ensure each bid has what you desire to install.
Why Are My Contractor Bids So Far Apart on Price?
So, even if you did everything right and your bids now include all the exact things you want including and are specific about materials, it’s quite likely there will still be a large range among the contractors’ prices. As frustrating as this may seem, there are a few reasons for this. Let’s face it, every contractor is different and they all have different expenses, so their bid will reflect this. If you see a contractor advertising on tv, odds are they will be more expensive than the ‘one-man shop’ contractor working from home.
Beyond this, every contractor will view your job differently. Some may see a simple ‘slam dunk’ project their crew can jump on and finish quickly. Others may see a more complicated project with issues that may arise and create challenges and delays. Obviously, the second contractor will put more ‘contingency’ or ‘padding’ into their bid price, so they don’t risk losing money if complications occur. Or, if a contractor happens to be very busy, they might quote you a higher price, figuring they don’t really need the work right now but would ‘fit it in’ if the profit was good.
Every contractor knows that surprises will come up along the way which creates extra work. Some contractors already include some padding to address things like this without asking the homeowner for extra money. Other contractors like to make their bids as low as possible, knowing full well they can make more profit during the project by charging for extra work or ‘change orders’.
Should I Throw Out the Highest Bid or Lowest Bid?
Since you’ll be getting at least three general contractor estimates, you’ll have three prices to compare. It’s always helpful when 2-3 of these bids are pretty close in price. For example, if your bids for a bathroom remodel are $22k, 24k, and $25k, you can be confident they are all in the ballpark. If you have 2 close contractor bids and one outlier (say $22k, $24k & $13k), you should start with the assumption that the outlier is unrealistically low or high (or doesn’t have the same items included).
The most challenging situation is when you get bids that are all far apart even after you’ve ensured they include the exact same scope and materials (like $45k, $65k & $80k). Most people’s instinct is to either select the low or middle bid in this case.
In this situation, I suggest a homeowner needs to do a few things. The first is to get a fourth contractor bid, which should help corroborate one of the others. But, more importantly, this is the time to perform a thorough vetting of the contractors you are considering. People sometimes forget that cost isn’t everything and it’s even more important to select a general contractor who will be responsive, easy to work with, and deliver a quality product on time and on budget. Don’t forget that price has nothing to do with the quality and integrity of the contractor and that will take some additional research on your part to determine.
When it comes to planning and coordinating a home improvement project in Los Angeles, Orange County, Ventura County or San Diego, you shouldn’t have to go it alone – GreatBuildz can help you understand and compare multiple contractor bids.
GreatBuildz is a free service that connects homeowners with reliable, thoroughly screened general contractors and provides project support from start to finish. Call now (818.317.3567) to chat with a real person about your next renovation project or visit our website for more information: www.greatbuildz.com.