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Does a Lower Estimate Really Mean a Lower Bill? 7 Tips to Avoid the Stress of Unwanted Financial Surprises When Working with Contractors

April 11, 2022

Two people sitting at a table together - one individual showing the other a bill while the other individual reacts with surprise, blowing coffee out of his mouth

You’re embarking on a home renovation or new build. Maybe it’s the first time you’ve hired a contractor, or maybe you simply haven’t been happy with the contractors you’ve worked with in the past and desire a better experience this time around. Whatever the case may be, understanding what to look for in a contractor and how to decode the information they give you could save you a huge headache and a lot of cash.

 

Tip #1: Find a Contractor with a Reputation for Integrity

The bid process can be competitive, and the unfortunate truth is that some contractors may bid low intentionally just to get the job, knowing full well that they can’t meet the numbers they’ve listed. Is this ethical? We don’t think so, but it does happen. So how do you know if it’s happening to you?

 

You can ask the contractor directly for references, but if they don’t see a problem with providing a dishonest bid, they might not see a problem with providing inauthentic references either. Instead, we recommend looking at their social media. Oftentimes, you might be referred to a specific contractor by a friend or family member who only used the contractor once. The experience they had may be representative of the contractor’s typical work, but it’s still smart to hop online and spend a few minutes seeing what others are saying. Are people interacting with them on Facebook and Instagram? A decent online following is evidence of happy customers. Look at their credentials. Have they earned any awards or badges on Houzz or in their local communities? Businesses don’t earn awards or followers unless they make it a habit to please clients, including when it comes to delivering on schedule and within budget.

 

Tip #2: Vet Their Project Management Process

Even the most honest contractors can drastically underestimate a project. When this happens, it’s often the result of a lack of resources put into project management. Large projects require a skilled project manager to keep everything running smoothly. Time is money, and when things don’t move as efficiently as possible, the dollars add up quickly. Find out if the project manager you’ll be working with is experienced enough to estimate time well and if they have the technology needed to navigate the many moving parts of a construction job with accuracy and ease.

 

Tip #3: Don’t Rush the Design Phase

It can be tempting to get multiple estimates and simply move forward with the lowest one. When that seemingly affordable contractor wants to move forward without a significant investment in the design phase, you might want to pump the breaks and reconsider your options. To get an estimate right, a lot of communication is needed. When a contractor is asking questions early on, it means they are working hard to truly understand your needs, which will minimize change orders along the way. Unexpected changes equate to unexpected costs. Before you know it, that exciting lowest estimate could quickly become double. It’s certainly faster to put together an estimate without a clear breakdown of the scope and finishes, but it’s far less accurate. A quality design build process offers a proactive solution to make your building experience a pleasant one. 

 

Tip #4: Ask About Subcontractors

For large projects, some of the work will be farmed out to subcontractors. Though it isn’t uncommon for a company to have certain subcontractors they use more often, it’s important to know they evaluate and re-evaluate the quality of work being provided to assure the subcontractor communicates well with their team and produces work that will meet your expectations. Anything less can lead to mistakes that will cost you time and money. It’s worth asking contractors if they have the proper subcontractor agreements in place and list all subcontractors as additionally insured. Even if a subcontractor is licensed, they could be paying their staff under the table and not following the proper rules for worker’s compensation insurance or taxes. Saving a buck up front may not be worth the risk of getting tangled up in any legal snafus.

 

Tip #5: Find Out if They are Licensed, Bonded, and Insured

Yes, in Washington State, contractors are required to be licensed, bonded, and insured. If you’re doing a large remodel or custom build, it’s nearly a given anyone you are talking to will be up to date with these requirements. However, for smaller jobs, and maybe even significant remodels, you may talk to companies who are trying to save money by skipping these steps. Just remember, these requirements are in place to protect you. If your contractor is not licensed, bonded, and insured, there’s no way to hold them accountable for completing your project in accordance with all applicable codes, and, if the work isn’t completed correctly, you won’t have a path to hold them accountable for any damages. Contractors who are not in compliance with this will likely provide lower estimates, but forgoing this level of protection could cost you if the work isn’t done properly.

 

Tip #6: Ask What Their Average Overrun is for Projects Similar in Size and Scope to Yours

Taking the above advice should lead you to the right team for your job. It doesn’t hurt to ask directly for a company’s track record when it comes to delivering on budget, though. It's common for contractors to provide a low estimate initially and then use a cost-plus contract. This means you’ll be charged for the materials plus an hourly labor rate. This can lead to final bills that end up being twice as much as the initial estimate. When a project goes over budget in the construction industry, it’s called cost overrun. When discussing a cost-plus option with a contractor, ask what their average overrun is and if they utilize change orders. A good contractor will help you understand that some degree of cost overrun is to be anticipated. However, if you’ve followed all of the tips above, you’ll hopefully end up with a contractor who has historically been able to land near their initial numbers. If the word “near” is still worrying to you, consider one study that showed only 31% of projects came within 10% of their budgets over a three year period.

 

Tip #7: Select a Contractor Who is Transparent Regarding the Volatility of the Market in Current Times

Five years ago, the above tips would have been enough. However, recent national and global events have wreaked havoc on the stability of costs of goods. Though it can be anxiety provoking to accept that initial numbers are estimates only, it may be a red flag if a contractor doesn’t help set this expectation for you. It could mean the contractor is looking to bid low just to get the job without regard to consequences down the road. At Highline, to protect both parties, we have the option to use a guaranteed max contract. This provides some wiggle room for market volatility when purchasing materials, while offering peace of mind for you – knowing we have an agreed upon cap that cannot be exceeded.

 

If you’re ready to find the right design and build team for your custom home, ADU, or remodel, we’re here to help. We promise we’ll do our best to decrease your chances of any unwanted surprises along the way.  

 

 

Back to the Recently at Highline

“Highline exceeded our expectations.”

“Communication was constant, honest and clear. Trevor and his crew were all friendly and professional.  They listened to our requests and delivered.

”We are thrilled with the quality of work! The project was on time and on budget. We will definitely be recommending Highline to our friends and family.”

– Matt Whitten, Bellingham, WA

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