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Question DetailsAsked on 3/24/2014

How to respond when a contractor's estimate greatly exceeds the budget?

We are currently soliciting bids for a large outdoor project -- fireplace, fire pit, pavilion, kitchen, deck expansion, patios, plantings, retaining walls. We have talked to four contractors, and all four knew that our budget was up to $200K. EVERY contractor we have met with said, no problem, this project can be done easily in that range. We just received our third bid yesterday, and, like the first two, it was *way* over the budget coming in at $300K with no options to make it less expensive. We live in a nice suburb of a large city, and the joke is that there's one price for our neighborhood and another price for everyone else. We were very clear about our budget from the start, so is it normal for estimates to be so much higher? Are they expecting us to ask for a huge discount? We really love the last contractor's design for the space, but right now we're insulted by his estimate and disregard for our budget. How should we respond?

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2 Answers

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1) Could be right about your neighborhood cranking the price up - I used to do work in West LA area - Beverly Hills, San Vicente, Santa Monica Canyon, Malibu area - and the comparative bids that came in were outrageous at times, especially if the owner was a big name movie or TV star or such - sometimes 5-10 times what was reasonable. If you are in a high-end area and contacting contractors who work predominately in that area, that could be the issue - maybe you need bids from people located a bit further away. Your first clue might be if they pull up to your house for the site visit in a Ferrari or MErcedes rather than a pickup truck.


2) Mistake #1 was telling them the budget up front - you should do enough research or, for this size job, get an architect on board up front, so you have a preliminary cost estimate at least and preferably a detailed construction cost estimate, BEFORE talking to contractors, Then you will know what a reasonable price is for your scope of work, and the project will have been scaled down to the budget available or the budget increased if necessary to accomplish what you want.


3) Unless you are on a fairly steep hillside, $200,000 sounds like more than enough and $300,000 as overkill, unless you are creating the gardens of Babylon and a TV sound stage sized kitchen. I figure for a "normal" type job your outdoor amenities might run around $20-50,000, planting patios and walls maybe $10-25,000, and kitchen addition maybe around $40-100,000, for a total of maybe $70,000-175,000. OF course, this is scopeof work sight unseen, but it is rare to see a job that would exceed that unless you are talking a multi-milion $ home. You definitely need an architect - in your case, a large enough practice that they have both a residential remodel and a landscape architect on board.


4) Something is definitely out of kilter here - and I think it is that you are trying to use contractors to design your project, instead of the professional designers - architects - so you are getting carried away (or the contractor's see it that way) with the scope of work. Alternatively, maybe just out of the goodness of their hearts they are offering to lighten the load of that gold you are carruing around that is causing your pants to crease and droop.


5) At this point, your choices are an architect with deliberate construction cost estimate, or to have each contractor come over and explain they are way over your budget, and have them explain the cost breakdown and what item(s) are making the job so expensive. I had a homeowner call me once to assess his job as he was worried about why the bids for their barbecue deck and backyard landscaping were coming in so high - turned out in the very detailed wish list they presented of what they wanted, a full size deep-end swimming pool with high dive, in-ground 6 person pavilioned jacuzzi, and full outdoor kitchen were included - and they considered those as just ancillary items added onto the deck and landscaping job, when they actually constituted over 3/4 of the total bid amounts !


6) Remember one thing - you are saying budget, which it might be in a financial sense, but until it is matched up with an agreed-upon scope of work, it is not really a "project budget" - it is a wishlist and "available funds" you are prepared to spend on it, not really a "budget" - which would be defined as a realistic allocation of funds for a specific agreed upon scope of work. If multiple estimates come in higher than you think as in your case, it is usually not due to overpriced buts, but rather to an overly aggressive scope of work, unrealistic buyer expectations, or bidders running shy because of their impression that the owner will not accept change orders but will want more than the raw initial scope of work so are padding their bids with contingencies. In your case, without architect's plans for this size job, this latter case is what I think might be happening.

Answered 3 years ago by LCD

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LCD - thanks so much for your thoughts! Very helpful! No pools involved in our backyard design, and we have no Academy Awards on our mantel to drive up the costs. This is our "Dream Home," for sure, and we hope to be here for about 20 years. We think these contractors are just trying to take advantage of us. We were clear with each contractor (they pressed us, although we did think we shouldn't say anything about a budget), and they were certain they could do it well within our budget. It's unfortunate that they lost our trust by blowing through that number on the first call. We have one more estimate coming in on Friday. We are hopeful that he is more in line with our budget. Oh, and the first guy we didn't give a $ budget amount -- his estimate came back at 700K. I'm not joking. He wanted to tear down our deck (a 1-year-old ipe deck that the builder put on the house) and rebuild a deck for 296K. Again, no pool involved. This is why we started saying 100-200K, b/c our friends had told us that's what we could expect. One last note -- since you're in the business you may appreciate this -- the guy yesterday told us he "doesn't make much money on these jobs." Really? So you are taking in 300K in 8 weeks and not making much money? If that's the case, then he sounds like a bad businessman, and we probably shouldn't be doing any business with him. Thanks again!

Answered 3 years ago by Guest_9179508

0
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Glad I could be of help - going as much from the tone of what you say as the actual scope, since obviously have not seen the job, if you got a $700,000 bid and three at $300,000 when you told them $200,000 or less - then sounds like you either have unrealistic expectations for what it should cost, or the scope was not well defined - either way, I would say definitely work up plans and project cost estimate with an architect, then go back to those contractors you felt comfortable deaing with, with a revised well defined scope of work.


Good Luck with your project

Answered 3 years ago by LCD




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