Why Do Contractor Quotes Vary?

Researching a few different remodelers is a natural step in planning a home renovation. You may ask for a few estimates before selecting a contractor, but what happens if those estimates look vastly different? At Advance Design Studio, we’ve seen the many reasons why contractor quotes vary, and we know how frustrating it can be when you’re just exploring what your project might cost. We’ve also heard countless stories of homeowners who hire the contractor they thought was the cheapest but actually ended up costing more money and time than they anticipated. Choosing the wrong contractor is a mistake we want to help you avoid. It’s important to know how to read each estimate you receive – beyond just the dollar amounts presented – and fully understand what each team offers.

Below are the most common reasons why contractor quotes can vary and what to look out for as you plan your project. You’ll also learn what steps to take if you receive multiple estimates that look very different. We also highly recommend saving a copy of the top questions to ask when interviewing contractors to help find your ideal remodeling partner!

1. Different Business Models

Defining the services each contractor includes in your estimate can make a huge difference in your investment. Here are a few services to watch for that could impact the estimate you receive:

Team Size: Larger firms might employ full-time, in-house employees, which can lead to more consistent quotes and a predictable team for the project. However, they may charge more to account for overhead costs, such as salaries, benefits, and insurance. Conversely, smaller or independent contractors may rely on subcontractors or temporary labor. While this can sometimes lower the overall quote, the quality and reliability of subcontractors can vary, leading to a less predictable outcome.

Design Services: Firms that include a full design-build process operate differently than contractors who are built to handle construction only. The overhead required to show products at a brick-and-mortar studio and staff a team that handles the entire design process may increase your project investment. Still, it will ensure your designs and materials are fully aligned with the construction logistics.

Construction Management: Teams that manage your project’s construction will handle your project’s timeline, deliveries, schedules, and all crew members and subcontractors. Their team may be in-house or subcontracted depending on the scope of work. They may also offer communication tools to stay in touch with everyone involved in the project. For example, our team utilizes Buildertrend to inform clients of all project updates and documents. Without management services, your contractor may expect you to manage things like scheduling and finding other subcontractors on your own.

Permitting Services: The time and energy it takes to submit and obtain an approved permit will vary depending on the project, and some contractors may offer to handle this for you or have you submit on your own. For example, our team handles the permitting process for all remodels so our clients don’t have to. We feel that remodels run smoother when the team responsible for all design and construction communicates directly with the village on behalf of the client.

Defining the level of service you want for your project is important when comparing estimates. Ask yourself how much work you want to put in when it comes to the details of design and construction. This will help you find the best fit for your remodeling partnership and help you understand the differences in quotes you may see.

2. The Project Scopes are Different

If the project isn’t defined well enough, you will receive different interpretations of the work included in your project. This is why sending your project out for traditional “bids” may not be the most reliable, as it can lead to a wide range of confusing estimates that aren’t comparable. If you ask multiple contractors to bid on your project, each contractor will understand your project differently. One might think you want a basic remodel, while another might assume you want custom upgrades or finishes. Resulting bids often include incomparable products and services, like a frustrating game of comparing apples, oranges, and bananas for you to sort through.

Some other services that may or may not be included:

• Architect and engineer integration
• Material selections and procurement
• Billing and accounts payable
• Title company integration
• Product specification and delivery
• Product oversight and warranties
• Detailed construction timelines
• Site maintenance
• Subcontractor management and oversight
• Village inspections
• Comprehensive warranties and close out procedures

3. The Project is Undervalued

In some cases, one estimate might come in much lower than others. This does not necessarily mean you’re getting the best price, because it may mean the contractor is charging too little for the work. There are a few reasons why your project might be undervalued.

They are a “Bait and Raise” Contractor: If your estimate is suspiciously low, or vague in drawings and specifications, you could be dealing with a company that uses “bait and raise” tactics. Some contractors deliberately submit a low initial quote to win the job, only to increase the price later through change orders and additional costs. This deceptive practice can leave clients paying far more than they initially expected by the time the project is complete. These contractors may claim unforeseen circumstances or miscalculations as justification for price increases, making it essential to review contract terms carefully and seek transparency in pricing.

They are a “Cost-Plus” Contractor: A cost-plus contract means that the contractor is reimbursed by you for the actual costs of materials, labor, and other expenses incurred during your remodel, plus more to include profit. Be wary of contractors who advertise cost-plus pricing, because without a fixed-price agreement, you’re basically writing a blank check to your contractor. With this contract model, it’s very easy for costs to balloon out of your control.

Seasonal Fluctuations of Work: Depending on the industry, some trades can experience seasonal highs and lows in workload, which can impact their estimates. During slower periods, some contractors may offer unusually low estimates to keep their crews busy, even if it means taking on projects at lower margins. Conversely, pricing during peak season may be inflated due to high demand. Understanding the contractor’s workload and industry trends can provide insight into whether a low estimate is a strategic move or a red flag.

Cash Flow Issues: Contractors facing financial difficulties may quote low simply to secure immediate cash flow. This can be a sign that they are struggling to pay suppliers, employees, or other expenses. While a low estimate might seem appealing, working with a financially unstable contractor poses risks, including project delays, quality issues, and unfinished work.

4. Contractor Experience Levels:

Contractors who employ skilled laborers or specialty tradesmen do so to provide the quality craftsmanship required for custom millwork, tiling, and other one-of-a-kind details you may want for your project. If one contractor has a long history of success with custom projects, they may fall on the higher end of estimates you receive compared to those with inexperienced crews. Look for past client experiences on platforms like GuildQuality, Google, or Houzz to see what real clients say about working with the team you’re considering. If you need additional reassurance, interview recent clients of the contractors you are considering to gain insight into their process.

New to the Industry: New contractors eager to establish themselves may offer low estimates for two main reasons: they lack accurate estimation experience, or they may want to secure quick business and sacrifice margins as they build a client base. Without a thorough understanding of material expenses, labor hours, and project complexities, they might not be able to accurately price your project and air on the low side to secure work. While their enthusiasm may be genuine, hiring an inexperienced contractor can introduce greater risks of project delays, unexpected costs, and lower-quality workmanship.

5. Material Quality Differences

Not all materials are created equal, and each contractor will have their own preferences when it comes to different brands or grades of material. This will impact both the cost and the longevity of your remodel. Larger remodeling firms will likely have stronger connections with direct suppliers for product discounts, while smaller or newer contractors may have higher material costs due to limited purchasing power. Your total investment will be impacted by materials used –  locally sourced materials, eco-friendly products, and imported materials will all vary in cost. Even seemingly identical products- a faucet, for example- purchased through discounted “big-box” stores can be made with lower-quality plastic or zinc alloy parts that wear out more quickly than their supplier-grade alternates that may be made with solid brass.

Be sure to ask about the materials being used in your project to make sure you and your contractor are on the same page. Some contractors may use lower-quality materials without clearly stating it in the quote in an effort to lower prices, while other contractors may include materials that will stand the test of time and come with warranties to keep you covered long after the project is complete.

 What to do When Quotes Vary

Prioritize your goals: Sit down with all decision-makers for your remodel to discuss your priorities for the project. This will help you weigh which team aligns with your remodeling goals as you compare. Ask yourself questions like these to help clarify what kind of partner you need:

• Are you ready to manage the project on your own, or would you prefer an expert to handle the logistics for you?
• How important is the quality of materials for your project?
• Are you confident in specifying and ordering everything needed for your project, or would you like assistance?
• How important is a contractor’s reputation when choosing who you work with?
• Are you looking for a quick fix, or do you want a remodel done properly and to last?
• Do you want to have a clear project cost upfront, or are you okay with potential change orders along the way?

Be Honest and Ask Questions: If you feel like an estimate is suspiciously low or high, be honest and ask them why the estimate feels high or low. You will learn a lot about a company from how they answer questions like this.

Look at the Details: Take time to analyze each estimate to see what you can learn about the services, materials, and scopes of each remodeler you are considering.

If you’re ready to complete that home remodel on your list but aren’t sure where to start, schedule a complimentary consultation with our design team. We will help you break down the steps needed to complete your project and answer your questions regarding investment ranges, layout ideas, timeframes, and more.