Home remodeling is a tricky business, and unfortunately all too often, clients are left at the end wondering if they got a good deal, or…not. In an earlier blog post here at The Shed entitled “10 Home Repair Myths Busted,” Andrew explained:
“The best way to avoid this is by getting multiple quotes (at least 3 to 5, but as many as you need to feel confident that you’re getting a good price), and by going with the most detailed estimate instead of the cheapest one.”
This is great advice… now let’s look at how you are going to make this happen.
Quote, Estimate, or Price… What is the difference?
These terms all get thrown around in the business, and they may or may not mean the same thing. There are a lot of different ways that a contractor may bid a project. Unfortunately in remodeling, it is often hard to “quote a firm price” because of extenuating circumstances. For instance, in an older home, a remodeler never really knows what they will find when they tear out an old bathroom. Questionable pipes, improper venting, non-code compliant wiring… all sorts of things that might affect the final bill. In other cases, say, building a new closet and installing closet organizers, the final price is pretty simple to estimate. The most important things are to make sure that you have everything in writing in advance, that you understand what is and is not included, and that you are in agreement with the contractor as to how change orders are handled. More on that in a minute.
Compare Apples to Apples.
As Andrew said in “10 Home Repair Myths Busted,” get as many estimates as you can. In a small town, getting five written estimates is tough, but get no less than three. The old rule says to “Throw out the high and low bids and choose from the ones in the middle,” but that really doesn’t always apply, especially if different contractors use different bidding methods. Here are a few that you might see:
Fixed Price Bid
The best situation for the client is to get a “fixed price” bid. This means that the contractor gives you a price for the entire job, including materials, labor, overhead; one number for the entire project. BUT… (there is always a “but”) make sure that you understand what contingency plan is in place for unexpected circumstances. That fixed price bid better list every fixture, every closet rod, every trim and door style, or you may get hit with upcharges if it isn’t included.
Time and Materials
Time and materials is a good way for a young remodeler to work, but on a bigger job, it can really expose the customer to a lot of risk. What is to keep someone from running up their hours? Where is the motivation to get the job done as quickly as possible? Any T&M estimate should have a cost cap, or “not to exceed” amount attached to it. I like to use this method on jobs that pose a lot of question marks. I can generally come up with a “worst case” number that would cover any possible contingencies. Then, if I come in under the “not to exceed” number, clients are happy. If I go over the cap, I eat the overage, so I share a bit of the risk.
Another method of estimating a job is called “cost plus” billing. “Cost plus” is basically time and materials, but with an added “plus,” which is a pre-determined profit margin for the contractor. Cost plus is more common on larger jobs where fixed price billing is not really possible. Cost plus is a very fair system for both the contractor and the client, especially when the project is very unique and difficult to bid. However, it demands a very high level of accountability and involvement on the part of the client in order to assure that costs are being kept as low as possible.
Every one of these types of contracts needs to have a system for change orders to be made. Change orders happen when something not in the contract arises. One example might be unexpected circumstances. Perhaps the contractor opens up the wall and finds a termite infestation. Obviously, that needs to be treated before he can close the wall up again, but it’s not in his contract. If he needs to call in an exterminator, the client needs to be given an estimate for those services, and agree to pay the extra cost. Another example might be if the client decided that they just weren’t happy with a paint color that they had chosen, after it was on the wall. Again, repainting the walls was not in the bid, so it is time for a change order. Any contractor worth their salt will NEVER make a change to the scope of work that involves additional cost without written consent from the customer. Make sure that your contractor uses written change orders!
In addition to the bid, make sure you get to know a bit more about the contractor. How long have they been in business? Do they have references? Photos of past work? Are they licensed, how much liability insurance do they carry, and do they have a good rating from the Better Business Bureau? Do they belong to the local Chamber of Commerce or homebuilders association? A well regarded local business with roots in the community may cost a little more, but they also may be more likely to have a solid reputation for quality.
Cost is not always the determining factor.
If you choose to go with an established local firm with a great reputation in the community and a long list of happy customers, chances are they might be a little more expensive. BUT… things can still go wrong. It’s the nature of the business. On the other hand, a young remodeler may just be going out on their own after years of working for that same big company, and they are hungry to build a client base. If they have a few satisfied customers behind them and offer you the lowest price, you may be able to get a great deal. What you want to watch out for is the fast talker who promises the moon at a rock-bottom price, the fly-by-nighter, or the total newbie. Everyone starts somewhere…but preferably not on YOUR house.