How to Read a Contractor's Estimate

The number at the bottom is the least informative thing on the page. What tells you whether an estimate is any good is its structure: what the scope actually describes, what sits in allowances, what is excluded, and what happens when something unexpected turns up.

Read one properly and you can usually predict what your final invoice will look like. Read only the total and you are guessing.

I get Maine homeowners three quotes on the same written scope, which is the only way any of this comparison works. That covers general contracting statewide and the builders I use around Portland. Free, and no obligation to hire.

This page is about reading one document carefully. Comparing three of them against each other is a different skill and it lives on the quotes page.

What is the difference between a quote and a bid?

The words get used interchangeably and they should not be, because they carry different weight.

An estimate is, strictly, a professional guess. A quote or a fixed price proposal is a commitment to a number. A bid is what a contractor submits in a competitive process. A proposal is whatever the document calls itself.

None of that is legally magic. What governs is the language inside the document, so read for the words "estimate", "approximate", "subject to change" and "not to exceed" rather than for the heading.

If the document says estimate and you believed you had a fixed price, you did not have a fixed price. Ask which one they are giving you, and get the answer written into the contract.

What should the scope of work section say?

This is the most important part of the document and the part people skim.

The scope is the promise. Anything not described here is not included, no matter what was said at the kitchen table. Read it as though you were the contractor looking for what you do not have to do.

Look for physical specificity. "Install new flooring throughout" is not a scope. "Remove existing flooring in kitchen, dining and hall. Install underlayment. Install owner selected tile, approximately 340 square feet" is a scope, because it names the rooms, the preparation, the quantity and who is choosing the material.

Check that the scope matches your written project description item by item. The single most common gap I see is something that got discussed and never made it onto the page.

What is an allowance on an estimate?

An allowance is a placeholder. It is money set aside for something you have not chosen yet, and it means the contractor priced a number rather than a product.

Every allowance is a decision deferred, and the risk of that decision sits with you. Pick something above the allowance and you pay the difference plus, usually, the markup on it. Pick something below and you may or may not get the difference back, which is worth asking about before you sign.

Read every allowance in the document and ask yourself one question: can I actually buy what I want for that. Then go and check, in a real shop, before you sign anything. An allowance that will not cover your taste is a budget overrun with a date already set on it.

Ask what the allowance covers, too. Material only, or material and labor. A tile allowance that excludes the setting is a very different number from one that includes it.

Why do exclusions matter so much?

A list of exclusions is a sign of a careful contractor, not a stingy one.

The ones you will see most often: permits and their fees, dumpsters and disposal, temporary heat, painting, flooring, appliance installation, landscaping and site restoration, and anything structural discovered after demolition.

Read the list and price the excluded items yourself, because they are still going to happen. A quote that excludes permits, the dumpster and painting is not cheaper than one that includes them, it is just less complete, and the difference will find you in month two.

Where a quote has no exclusions at all, ask for them. Everybody has them. A contractor who has not written them down has either not thought it through or intends to raise them later.

What is the contingency line for?

On a renovation of an older Maine home, a contingency is a mark of experience.

It is money set aside for what is behind the wall, and it should be visible rather than buried in the trade lines. Ask what happens to it if it is not spent, and get that answer in writing, because the two possible answers are very different for you.

An older house quoted with no contingency at all is not a more accurate estimate. It is the same uncertainty with the risk moved onto you, and it will arrive as change orders instead.

Which is better, line item or lump sum?

A lump sum estimate gives you one number for the whole job. A line item estimate breaks it into trades or phases.

Line item is more useful and you should ask for it. It shows you where the money is, it lets you see which parts are worth reconsidering, and it makes a later change order much harder to inflate.

There is a legitimate objection. Some contractors will not itemise because it invites homeowners to shop individual lines and second guess the pricing on each, and that is a real and reasonable position on a fixed price job.

The middle ground is a breakdown by phase rather than by cost component. Demolition, foundation, framing, roofing, mechanicals, insulation, drywall, finishes. Most builders will provide that, and it gives you what you actually need.

How do labor, materials and markup break down?

Some estimates separate labor and materials. Some do not, and either is normal.

Where they are separated, do not react to the labor number in isolation. Labor on a residential project routinely runs at or above the material cost, and on a bathroom it can be most of the job, because the room is small and the number of trades passing through it is not.

Markup is real and it belongs there. A general contractor coordinating subs, carrying insurance, warrantying the work and running a business has overhead, and a builder with no markup is not cheaper, they are one bad month from being your problem.

What is worth asking is the markup on change orders specifically, as a percentage, before you sign. That is the number that moves once work starts.

What should the payment schedule look like?

The estimate should contain one, and it tells you a lot about the business.

You want draws tied to completed stages rather than to calendar dates. Foundation complete, frame and roof complete, rough-in inspections passed, substantial completion, final on punch list.

Look at the deposit specifically. In Maine the initial down payment on a home construction contract is capped by state law at one third of the contract price, and a request past that is outside the rule rather than a matter of negotiation. There is more on it on what the state allows up front.

Look for a holdback at the end. Something meaningful, released on punch list completion, is normal and expected.

How firm are the dates on an estimate?

Maine's home construction contract law requires start and completion dates in the written contract, so they should be there.

Read how they are qualified. "Substantial completion approximately twelve weeks from start, subject to material availability and weather" is honest. A bare date with no conditions is either optimistic or not being taken seriously.

Ask what happens if the dates slip, and whether the contract says anything about it. Most residential contracts do not carry penalties for delay, which is worth knowing before you assume otherwise.

Fixed price, cost plus, or time and materials?

Three ways to structure a job, and the estimate should tell you which you are getting.

Fixed price. One number for a defined scope. The contractor carries the risk of overruns and prices that risk into the number. Best for well defined projects where you know what you want.

Cost plus. You pay actual costs plus an agreed fee or percentage. You carry the risk and you see the real numbers. It can be cheaper on an unpredictable job and it requires trust and an open book, so ask how costs get documented and how often you see them.

Time and materials. Hourly labor plus materials, usually with a not to exceed figure. Common on repairs and small work where nobody can define the scope up front.

None is better. A fixed price on an unpredictable renovation gets loaded with contingency, and cost plus with somebody you do not trust is a bad idea. Ask which one you have, because homeowners assume fixed price and frequently do not have it.

What does a thin estimate tell you?

One page, one number, a signature line and nothing else.

It tells you the contractor did not do a takeoff. Nobody prices a real job without counting the material and the hours, and if they did that work, producing a breakdown costs them nothing. A number with no structure behind it usually means the price was set by feel.

It also means you have nothing to hold them to. When a dispute arrives about what was included, the document is the only witness, and a one line document says whatever the person reading it wants it to say.

Ask for a detailed version. A contractor who will not produce one on a job of any size has told you something worth knowing.

How does an estimate become a contract?

The estimate is not the contract, and this is where people relax too early.

In Maine, work over $3,000 in labor and materials requires a written contract, and the state sets out what it has to contain: the parties, the work and materials, the price, the payment schedule, start and completion dates, a warranty statement, how change orders are handled, and dispute resolution notice. The Maine Attorney General publishes a free model contract that meets it.

Make sure the scope, allowances, exclusions and contingency from the estimate carry through into the contract, word for word where it matters. An estimate that is generous and a contract that is vague leaves you with the contract.

Read the final document rather than assuming it matches the one you liked.

Frequently asked questions

Should an estimate be free? For most residential work, yes. Some contractors charge for a detailed estimate on a complex project and credit it against the job, which is legitimate when it involves real design or engineering time. Ask up front.

How detailed should it be? Detailed enough that you could hand it to another contractor and they would build the same thing. That is the working test.

Why is the labor number so high? Because labor is most of residential construction. On kitchens and bathrooms especially, the trades passing through the room cost more than what you are picking out of a showroom.

Can a contractor change the price after I sign? Through the change order process, and through allowance adjustments where you pick something above the allowance. Both should be documented and signed before the work happens, which is why the change order clause is worth reading twice.

What if my estimate has no exclusions or allowances? Ask for both. Their absence does not mean everything is covered, it means nothing has been written down about what is not.

Is a verbal explanation good enough? No. Conversations are not enforceable and memories differ honestly. Anything that matters goes in the document before you sign it.

How to read a contractor estimate, then get three

All of the above works far better on three documents than on one, and getting three contractors to quote the same written scope is the part most homeowners never manage.

That is what I do. Same scope, same allowances, same deadline, three screened contractors. You read them using this page, and you compare them using the quotes page.

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