Decoding Contractor Estimates: What Every Homeowner Should Know
Temp Services Editorial Team
Home Service Cost Experts
Contractor estimates can be confusing, filled with industry jargon and line items that mean little to homeowners. Understanding how to read estimates helps you compare bids fairly, spot potential issues, and negotiate effectively.
Estimate vs. Quote vs. Bid
These terms are often used interchangeably but have different meanings. An estimate is an educated guess that may change. A quote is a fixed price for defined work. A bid is a formal offer often used in competitive situations. For home projects, you want quotes or fixed-price bids, not estimates that can balloon.
Line Item Breakdown
Quality estimates break down labor and materials separately. You should see the quantity and type of materials, labor hours estimated, and rates charged. Lump-sum quotes hiding these details make it hard to compare bids or understand where money is going. Request detailed breakdowns if not provided.
What's Included and Excluded
Pay close attention to exclusions. 'Price does not include permit fees' or 'painting not included' can add thousands. A complete estimate should specify: permits, disposal, prep work, cleanup, paint/finishes, and any subcontractors. If you're unsure, ask what else might be needed that's not in the estimate.
Allowances and Contingencies
For complex projects, estimates may include allowances—placeholder amounts for items you'll select later (fixtures, tile). These are estimates within estimates and may change. Contingencies (often 10-20% for renovations) cover unexpected issues. A project without contingency allowance may surprise you with change orders.
Payment Schedules
Legitimate contractors don't ask for full payment upfront. Standard payment schedules tie payments to milestones: deposit at signing (10-30%), payment at material delivery, payment at rough completion, and final payment at completion. Never pay the final installment until you've verified work is complete and satisfactory.
✓ Key Takeaways
- Get fixed-price quotes, not estimates that can change
- Request detailed line-item breakdowns showing labor and materials
- Carefully review what's included AND excluded
- Understand allowances are placeholders that may change
- Never pay in full upfront—tie payments to milestones