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Hiring a Remodeling Contractor
Bids vs. estimates and financing - Page 5

 

by Leon A. Frechette

Now that you have presented all your ideas to each contractor, it is time to enter into the financial phase. Ask the contractors whether they will give you an estimate or an itemized bid. There's a big difference between the two.

An estimate is an approximate bid and reflects only an educated guess. The total price could actually be hundreds of dollars over the contractor's estimate. If you check out consumer complaints, you'll discover that most complaints involve contractors who bill customers for amounts way over their quoted estimates.

An itemized bid, which I strongly recommend, is an exact bid that reflects all material costs, labor charges, taxes, and permits. This is the total price you will pay.

An important advantage of an itemized bid is that you can review the bid carefully and make adjustments to fit your needs if the total cost is too high. However, creating an itemized bid takes time, so some contractors will not do them, and some contractors don't know how to itemize. Also, because itemized bids show all material costs, some contractors fear you'll use their list to buy your own materials and do your own job, something that occasionally happens.

From a financial viewpoint, banks and credit unions prefer itemized bids because they spell out everything for the loan officer. Sometimes your contractor can handle your financing. However you finance your project, though, it's a good idea to borrow $1,500 to $2,000 over the bid price to cover any extras you might want to add to your job. This normally applies to jobs valued at $14,000 and over. Most home improvement loans take approximately 30 days to complete. Don't get discouraged—that's the system.




Click to Purchase

I have developed a series of legal business forms to help consumers and contractors through the bidding and contractual process. The Contractors Helping Hands Packet includes Itemized Bid Sheets along with a Contract/Agreement Sheet and an Extra Work and/or Change Order Sheet. To order your set of forms, click on purchase button to the left!

Copyright © 2006 LAF/C.R.S., Inc. All rights reserved. The previous article, in whole or in part, appeared
on the market in 1988 in The Helping Hands Guide To Hiring A Remodeling Contractor.



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