When you go to the grocery store to buy a carton of orange juice or a loaf of bread, you know exactly how much you are going to pay because each item is clearly marked. The same is not always true for a construction project. A contractor may give a ballpark number, an estimate or a bid. Each of these terms has a specific meaning and the homeowner would be prudent to understand the differences before committing to a project.
While many contractors are experts at determining a price, they cannot always foresee all the problems that may arise. Still, a “ballpark” estimate can be given on the spur of the moment. A contractor will roughly determine the cost of the materials needed and how long he thinks it will take him to do the job. For example, a homeowner may ask the cost to completely remodel a kitchen or add a room to the back of a home. A contractor could ballpark the cost at $20-$40,000 depending on the fixtures appliances chosen, the finishes needed and the speed with which the project must be completed.
A ballpark estimate is not binding and is really only used to gauge the interest of the homeowner before the time and energy is invested in detailing a true estimate of costs.
If a homeowner is seriously interested in pursuing a project, then he and the contractor will have to do a little work to arrive at a more accurate number known as an estimate. Estimates can be determined in a number of ways. For instance, many contractors will give one based solely on the square footage of the project. They know from past experience what their typical costs are and can simply multiply the measured area by the usual cost per square foot.
While still not binding, an estimate should be taken as a fairly – usually within 5% – accurate cost for the project. Any more serious deviation should be explained by the contractor before a binding bid is submitted. Be aware that different contractors will not only have different cost per square foot averages but may even use different cost estimation practices. So ensure that you understand what they are bidding on exactly when you go to compare different estimates.
The next level of accuracy involves a “line item” estimate. A contractor will generate a rough floor plan – that is, not an architectural or engineering schematic – and a list of finishes and all appurtenances involved in the project. This type of estimate is not perfect but it does allow you to narrow down the list of possible contractors and make a fairly accurate comparison between their estimates.
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