Quotes vs. Estimates: What Toronto Homeowners Need to Know When Hiring a General Contractor
When homeowners are planning renovations or construction projects, one of their first interactions with general contractors is to ask them for a quote. While quotes and estimates both provide cost information, understanding their differences is crucial to avoid misunderstandings and unexpected costs.
What is a Quote?
A quote is a fixed price offer for a good or service that becomes legally binding once accepted. It provides detailed pricing for a defined scope of work, but at the beginning stages of a construction project, even detailed drawings can leave room for interpretation.
Quotes include labor, materials, and other costs, but when the scope isn’t fully defined, contractors have to make assumptions that affect pricing. If unforeseen challenges arise (and they always do), such as structural issues or material shortages, the initial quote may no longer reflect the project’s reality, leading to disputes and additional expenses.
What is an Estimate?
An estimate is an approximate calculation of costs that offers flexibility, helping homeowners understand potential expenses as the project develops. Estimates are particularly useful during the early stages of a project, allowing homeowners to explore options and make informed decisions.
An estimate typically outlines anticipated costs for labor, materials, permits, and other factors, but it remains adaptable. As project details become clearer, the estimate can be refined, providing a more accurate reflection of final costs.
Why Asking for Quotes Can Be Problematic
When a contractor is sent a set of drawings and asked to provide a quote, they are essentially being asked to state, with accuracy, what the final project will cost. However, in large renovation projects with many moving parts, drawings at this stage never include every detail nor account for all costs. Quotes that are provided will involve assumptions that will naturally vary between contractors. This makes it impossible to compare quotes accurately, as they will not include the same scope, materials, or timelines. Choosing the lowest quote can lead to unexpected expenses when assumptions prove incorrect.
For example, one contractor’s quote might include standard-grade materials, while others may account for higher-quality options. One might account for site conditions, like property access, while the others don’t. Without a clear understanding of what’s included, homeowners might select a lower quote only to find that it doesn’t meet their expectations or needs.
When Quotes Are Appropriate
Quotes are best used when the scope is well-defined, such as when general contractors ask their subcontractors for quotes on specific tasks. For homeowners, quotes are more suitable in later project stages when details are finalized. Tasks like electrical work, plumbing, or cabinetry can often be accurately quoted once the overall design and requirements are confirmed.
Why an Iterative Estimating Process Works Best
For most renovation projects, an iterative estimating process allows costs to be refined as more details emerge. Just as architects and designers go through their stages of design, a contractor’s estimate should go through the same stages, refining the costs as the stages progress. This approach provides homeowners with realistic expectations and helps avoid budget overruns. Starting with a broad estimate and refining it through each phase ensures that homeowners understand potential costs and can make adjustments as needed.
An iterative approach also encourages collaboration between homeowners, architects, designers and contractors. Regular updates to the estimate allow for discussions about material choices, timelines, and design changes, ensuring that both parties remain aligned.
What Homeowners Should Ask For
Rather than complete a design and then go looking for a contractor, homeowners should engage a contractor early on. This will allow the contractor to work closely with the design team to provide estimates that align with both the homeowners goal and budget. This ensures better communication, realistic budgeting, and fewer surprises. Key elements to ask for include:
Itemized Estimates: Breakdown of costs for labor, materials, permits, and contingencies.
Assumptions and Exclusions: Clear documentation of what is included and what is not.
Regular Updates: Iterative revisions as project details are finalized.
How Lighthaus estimates projects
The first thing we do is to provide a high-level ballpark estimate, also known as ROM (rough order of magnitude) pricing. Once we determine that the rough costs align with the target budget, we engage homeowners in our preconstruction process. During this time, we develop various versions of estimates that align with the architect's phases of design, each one getting more and more refined (for more detail, see our blog on the 4 Stages of Pricing). By the end of this process, there should be a well-defined scope of work, a detailed estimate and a detailed construction timeline.
Tips for Homeowners
Avoid Rushing the Process: Take time to work through estimates with your contractor.
Ask Questions: Clarify assumptions behind any provided quote or estimate.
Focus on Value, Not Just Price: The cheapest option isn’t always the best.
Use Estimates to Guide Budgeting: Refine costs as project scope evolves.
Conclusion
Understanding when to use quotes and estimates is essential for homeowners. While quotes are useful for well-defined scopes, estimates provide the flexibility needed for complex projects. An iterative estimating process ensures transparency and helps homeowners and contractors stay aligned throughout the project. This approach minimizes surprises, manages expectations, and leads to successful, stress-free renovations. Properly estimating a project takes many hours. Which is why asking a number of contractors to ‘quote’ their project will result in a hurried attempt to win your business
Meet the Author
Dave Cook is co-owner of Lighthaus Built and has spent 17 years working in single-family construction in Toronto. Through the years, he has worked as a carpenter, site supervisor, and project manager for more than 60+ major, high-end renovations and custom homes.
As an HCRA-licensed builder, he and his company (Lighthaus Built) are well-versed in constructing high-quality homes and take pride in what they do.
On a personal level, Dave is very active in several sports - most notably, distance running, road cycling, and tennis. He bakes bread (for personal consumption) and no, this was not a Covid thing. He grew up eating homemade bread and has made my own for the past 20 years. He has been married for 20 years and has two teenage children and a dog.
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