Consumers regularly use price as one of several factors in making major purchasing decisions, and most people know to avoid a price that seems unusually HIGH. Nobody wants to pay too much. But savvy homeowners know that a price that is TOO LOW can also signal big problems ahead, plus major unexpected costs, for a remodeling project.

So, think of Goldilocks before signing on the dotted line of that remodeling contract.

Low Quality Products Cost Less

Some homeowners mistakenly assume that all building products are created equal. While one nail may be indistinguishable from another, this is definitely not the case with many other building materials. As you would expect with anything you buy, better quality, longer-lasting structural materials (windows, doors, flooring, roofing, cabinets) are going to cost more money. Receiving a low construction estimate may be an indicator that inferior quality and less durable materials will be used. When you get a remodeling estimate, make sure you understand EXACTLY the quality level of the building materials to be used in your project.

Poor Planning Can Lead to Unrealistic Pricing

A too-low estimate could be a strong indicator that the remodeler isn’t experienced in planning projects and estimating costs, and hasn’t based the estimate on a detailed, comprehensive Scope of Work. Control of costs, quality, and schedules requires solid upfront planning and conscientious project management. If a job is plagued by poor planning or execution, critical time can be lost at many stages of the project, resulting in cost overruns and headaches later.

Beware of “Fire Sale” Prices

A lower-than-expected price is a red flag rather than a green light. An experienced, reputable builder knows the real costs for quality materials and skilled labor, as well as the profit margins needed to stay in business. A company that chooses to ignore realistic pricing in the short term will have to cut corners somewhere. There is a chance they might leave you with a project of shoddy quality or, even worse, a half-finished project.

Low Estimates and Less Skilled Labor

In every industry, workers with the highest level of skill and experience command the highest salaries. The remodeling industry is no exception. If you receive an estimate that is surprisingly low, you should question whether less experienced or underpaid workers are going to be doing the work. Low wages often generate high turnover, substandard execution and a lack of personal investment in the project outcome. Remember, you’ll be living in your newly remodeled home for many years, and frustration with poor craftsmanship outlasts the satisfaction of finding a low price.

Small Allowances Can Cost You Big

A common practice in remodeling is for a remodeler to provide you an estimate/contract price that is based in part on “allowances.” These are placeholders in the budget that should cover the products and parts of the project that you want but have not yet selected (appliances, lighting, finishes, cabinets, etc.). Allowances are a perfectly acceptable way to estimate – when the contractor allows a reasonable amount of money for those items. But because a low price is attractive when selling, some remodelers use small allowances for only low-end components. Later, when you make your product selections, you’ll find you have to pay the difference between what was “allowed” in the estimate and what the product you want actually costs. For many types of projects, this can cost you thousands of dollars you had not expected.

Security May Be Missing

If you receive an estimate that is too good to be true, investigate whether the remodeling company saves on expenses by not carrying proper insurance, licenses, workers compensation coverage, or does not get required building permits or inspections when needed. Reputable companies always take these requirements seriously, and consider insurance, licensing, and permits as a fixed part of the cost of doing business. If a contractor takes illegal shortcuts here, can you trust them to be accountable to you and accept liability for code violations down the road? Sadly, the person taking the financial hit for lower quality and possibly illegal project execution is going to be the homeowner.

So, if an initial low estimate grabs your attention, stop and ask yourself why it’s so low. Your ultimate goal should be a smoothly-run project that results in a beautifully remodeled home – completed on time and on budget. Chances are, with a little more research, asking the right questions and getting detailed answers, you will decide against going “low-bid” and can avoid making a very expensive mistake.