This segment discusses some ways to inform the project cost and estimate process. These steps have helped us negotiate with contractors. More importantly, they have helped us understand our project budget and protect our pocket book from overpriced help.
The first estimate is rarely the final price for your project. That generally holds true for remodel work or larger projects. If it’s a simpler project, like repainting a room, chances are the price is the price. Yet, there is usually some room for negotiation depending on when and where you are. The project cost when you sign the agreement is also rarely the final price you’ll pay.
Develop Your Own Budget Cost
This is your estimate for what part or all of the project will cost. You should have some research and understanding of what a project costs when evaluating contractors. This cost can be developed in a number of ways depending on how complex your project is. True story: in our first home we embarked on a kitchen remodel process which likely the genesis for our “we can do this ourselves” attitude — we had three estimates separated by $150,000. I do recall asking the highest bidder “how” because I was armed with the following costs and knew I wasn’t that far off – was I?
Order of Magnitude Cost. I spend my work hours in an engineering world. A ROM, rough order of magnitude cost, is a simpler method. For a smaller home renovation project, this can be as simple as searching, “how much does a bathroom remodel cost?” There’s ample information on ranges and those ranges will be large and full of caveats. But they provide you with an understanding. Per our kitchen story – it told me that either my highest bidder contractor didn’t know what they were doing or they were too busy and asking for nutso costs. It also made me wonder if the low bidder knew what they were doing.
TIP: Having an idea of your project cost can also be useful in evaluating if your contractor understands the project or is capable of delivering.
Develop a cost for some of your big ticket items. This is important as this is where budget increases after the signed contract can really add up. Often contractors will have “allowances” or “budgets” within their cost estimate for various items. For example on a kitchen project, your contractor may propose $300 for fixtures, $500 for lighting, $2,000 for appliances, etc. The objective is to be armed with some data points by doing a simple price list yourself. If you have your heart set on designer pendant lights and they are $400 each, you’re now equipped with more information as your contractor is going to charge you the difference between the “allowance” and the price. Typically, installation or labor hours are not included in those budgets.
Develop a project materials cost list. This is a more challenging method as you need to be able to identify all the materials your contractor will purchase to complete your job. With this information, you are going to be “hand-grenade” close in being able to determine what the material vs labor cost is on the project. The labor cost is important because there is a lot of information on the web about how many hours a typical project takes. For example, we have done most of our bathrooms in about 40 to 50 hours. Although, there was some inefficiency as we juggled busy lives and young children – turns out one of our littles would wake up to a floor creak but sleep through a sawzall. I generally assume that various labor rates are between $60-120 hour depending on the type of work. Again, just another data point to help your negotiation.
Get some Estimates
Time to see what the market is saying your project might cost. Don’t wait to do this while you build your own ROM estimate if you know your budget range. This step will likely give you more data points to revise your estimate.
Get more than one estimate. Know the type of estimate you’re getting. Developing a cost estimate takes time. And contractors aren’t completing every job they estimate which is their time. When I work with a contractor I ask for their “ballpark” cost but with some higher level detail included. This saves the contractor time. You will have ample time to dig into the project details and estimate later.
Research your contractor. There are some great resources out there for researching contractors. One of our contractors actually had clients that were willing to show you their work done in their home. Pretty outstanding reference to be able to see the craftsmanship. I try to keep in mind that people tend to use references they’ve already vetted and I’ve read a lot of unreasonable expectations and misunderstanding between the lines of popular review sites. Better Business Bureau is a great resource.
What to do when your contractors asks you what your budget is. This can be a difficult question. Our tact is to communicate that we are in the budgeting phase and we’ve done some preliminary research on cost. But we’re looking for a contractor to work with. The importance here is that you don’t want a contractor to “plan to your budget” and not get the value of the investment you’re making. You want a fair price.
Up next we’ll explore how to negotiate with your contractor and how to deal with unforeseen project issues – there are always unforeseen issues and there will be things that don’t go as planned.
Let us know how you think about cost estimates with your projects!
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