Estimate vs. Contract: What Are You Really Signing With a Contractor?

You’ve probably heard the advice to get everything in writing when dealing with a remodeling contractor. Any reputable contractor will insist on the same. A precise understanding of the cost of renovation or repair and a laid-out payment schedule gives the contractor and their client peace of mind. Confusion can arise when costs are underestimated or estimates and contracts are conflated.

Throughout the process, avoid rushing and basing your choice on cost alone. John Walker, a Pittsburgh-based house-flipper and real estate agent, agrees. “Sometimes, the cheapest contractor isn’t the best. They might give you a low estimate and have you sign a contract, then the moment you give them money to start the job, they disappear for weeks while they finish another job. Never assume that signing a contract means your problem is solved.”

What is the difference between an estimate and a contract?

An estimate is just that—an estimation of how much a job performed by a contractor will cost. When the job is fairly small, contractors might deliver this estimate verbally, often simultaneously, as they come to analyze the needed work. However, a contractor estimate usually is provided in writing for larger jobs, such as whole-house renovations.

A contract is a binding agreement detailing the cost of the job. For larger jobs, the contractor should detail the cost of each line item and specify a payment schedule. Once signed, this becomes a legal document.

When do I receive an estimate?

It’s usual to receive a detailed estimate 3 to 5 days after the contractor first takes a look at the job. The contractor might offer a verbal ballpark number for small jobs while onsite. The larger the job, the longer it might take to receive the estimate, as the contractor costs out parts and labor.

Do I have to pay for an estimate?

Some contractors charge for an estimate for smaller jobs. For larger jobs, they often waive this fee. After all, why charge $100 for an estimate to complete a $25,000 kitchen remodel? At worst, they might add the site visit cost to the job’s overall cost. If a contractor charges for an estimate, they should disclose this upfront to ensure the homeowner is OK with it.

Do I have to sign a contractor’s estimate?

If a contractor insists that you sign an estimate, make sure that what you’re signing isn’t one of several common home improvement scams. The estimate should include language stating that once it has been signed, it becomes legally binding; in other words, it becomes a contract. The language should also state that once signed, the job can commence. A legally binding estimate should be detailed and state all the line items that a contract would, along with the payment schedule.

What should I do if a contractor starts work with only an estimate?

If your estimate is not signed, a homeowner should tell their contractor to stop so they can draw up a legally binding contract (should you wish to use them). Should this fail and the contractor insists on working at your property without the owner’s written permission, it’s best to take legal action.

If a contractor completes the job in the owner’s absence and sends a bill that has not been agreed upon, the owner should consider small claims court. Interactions with irate or desperate contractors can get messy, so it’s best to step away and get legal advice if the interaction is going south.

What essential things should a legally binding contract with a contractor stipulate?

Along with the bottom line (cost estimate), a contract should include details about the work schedule, duration, and payment.

• Fully Executed: Any home repair contract must be executed by both parties, the contractor and the client.
• Commencement Date: This can be determined as starting X number of days after the permits are received or a predetermined calendar date. However, it should be clearly defined.
• Defined Duration of the Project: This might change as the project continues, with add-ons and unforeseen delays (weather, permitting delays, or unforeseen issues such as leaks). There should be language in the contract that details how these delays will be handled, for example, how much notice you will receive.
• Defined Basis of Payment: This is very important in helping to avoid misunderstandings or conflicts. For smaller jobs, this might include a lump sum payment upon completion. However, for larger jobs, it will probably be set around milestones. For example, the contractor might require a third of the total upfront, a third in the middle, and a third at the end. Other contracts could stipulate payment before, during, and after certain line items are undertaken (such as flooring, HVAC, and electrical).
• Detailed Breakdown of the Cost: This is essential. Home remodeling estimating software allows contractors to get granular with the costs so that no light bulb or door hinge is left unaccounted for. Full transparency is the key to a successful contractor-client relationship.

How do I know I can trust a contractor to stick to the contract?

There’s a saying that a contract is only as good as the paper it’s written on. Walker says, “If a contractor has no money, taking them to court to enforce a contract will just have you throwing good money after bad,” he says. “It’s best to hire a good contractor to begin with–someone that’s not robbing Peter to pay Paul.”

To find a good contractor, he says, “You need to do some background work and ask around at real estate meet-up groups, look for referrals, check online ratings, and ask real estate agents and attorneys.”