Construction pricing structures can be confusing. That’s partly because of bad actors and partially because not all contractors use the same pricing methods. Today, Frame to Finish will review some of the most common construction pricing structures and methods in Roanoke, Salem, and beyond.
Different Construction Pricing Structures
Contractors use several construction pricing structures. While we have a preference, using a different pricing method isn’t necessarily bad. Both good and bad contractors use all these methods, so it’s important to vet your construction company regardless of how they price.
Quotes & Estimates
When a contractor tells you upfront what a job will cost, this is called a quote or an estimate. The difference between the two is how firm the price is.
In a quote, you know what the job will cost from beginning to end. Quotes are more common in jobs where the contractor has control over all project elements, and there will be no surprises. Builders most frequently use these for items they build with little to no risk of getting infuenced from external factors, nonstructural projects, or decks.
Estimates are similar to quotes in that you get an idea of the price upfront, but unlike quotes, there is no guarantee the price won’t change because of variables outside of the contractor’s control, scope of work changes, etc. The problem with estimates is that some unscrupulous contractors will lowball a project, knowing that they can always add more as they work. And once your house is opened up, you’re at the mercy of the company.
Of course, estimates can go up for legitimate reasons, but understand exactly what you agree to before the work begins.
Time and Material
Some builders will use a bill-as-they-go construction pricing structure that simply charges you the cost of materials and labor. They generally refer to this as time and material.
The benefit of this is simplicity. The negatives are that you don’t know what you’ll be paying until the project is complete.
Still, this construction pricing can make sense for simple projects, especially for handyman-type work. Again, knowing the contractor is trustworthy is essential!
Cost Plus
At Frame to Finish Construction, we favor a cost-plus billing approach. In our view, cost plus is the best way to bill our clients since it gives them a number to expect, but leaves room for something unusual coming up.
With cost plus, we provide a budget proposal for materials and labor but explain that if there are any surprises (for example, we open a wall and find that there was unknown structural damage or materials prices change), we will charge more or less.
The key to the cost-plus construction pricing structure is honesty, transparency, and communication. We’re straightforward with our clients, saying that our price is within specific parameters and explaining why it could change. The price can also go down if we complete the work with no surprises.
A Note on Deposits
Many, if not most, construction companies will require a deposit to begin work. This helps to cover the cost of materials and ensure they don’t lose money.
While everyone has a horror story about a contractor, every good contractor has a horror story about a client!
For smaller jobs, some contractors may ask for half up front. For large jobs, 20 percent is pretty standard. At Frame to Finish, we ask for a 10% deposit.
Before you make a deposit, be sure you sign a contract, look into your contractor’s references, and check that they are licensed and insured.
Fair Pricing, Excellent Work
We do what we do at Frame to Finish because we love it. It also happens to be the way we make a living. We’d love to offer you a fair price for some excellent remodeling!