Do you get confused when it comes to the difference between a quote and an estimate?
Each builder has a different process for pricing projects and with all these different industry terms, how are you to know the difference between a quote and an estimate? The truth is, it’s really hard to figure out the true cost of your project and there’s nothing more frustrating than not knowing where you stand in terms of budget. Not knowing the differences between the two might result in you picking the one with the ‘lowest price’. You might be thinking that you’re comparing apples with apples but it’s simply not the case. Not having a detailed list of inclusions and exclusions puts you at risk of going over budget or receiving a final product that doesn’t meet your expectations.
But when you understand the specific differences between a quote and an estimate, you will be able to better recognise how to compare quotes, and which builders prices you can trust. In reality, once you understand the basics of the two, you will be able to analyse beyond the price and review other aspects of what the builder is offering so that you can honestly compare prices and choose a builder that’s based on quality and value.
According to the 2019 Australia Houzz & Home Renovation Trends Study, out of the top five renovation challenges in 2018, staying on budget makes up for 32%. So being informed from the start will undoubtedly lead to less budget shocks and a clear expectation of what the final product will look like.
A quote is not an estimate, and an estimate is not a quote
Some builders will not spend the time and effort it requires to provide you with a quote so they will give you what we like to call a ‘guess-timate’. They do this knowing that as the project progresses, they will be able to charge you variations and additional fees to complete the project and increase their margins. So what you thought was a ‘good price’ in the beginning ends up skyrocketing and you’re left feeling, for lack of a better word, pissed off that you have to fork out money you didn’t expect to spend. The irony of all this is that the relationship becomes tainted and you feel forced to oblige to the variation costs.
A professional builder will ensure you know exactly what you’re getting for the price they have quoted by including a detailed scope of works with inclusions and exclusions. This way, you can make an informed decision on whether or not you can afford the project and you will have a clear vision of what the final product will be.
However, what tends to happen, is that people aren’t aware that there’s a difference between an estimate and a quote and accept the builder’s ‘word’ (or ‘guess-timate’) as final without realising that the price can drastically change. This is due to the fact that there’s a general belief in the building industry that a quote and an estimate are just different terms for the same thing when this couldn’t be further from the truth.
Just like anything in life, not all quotes (or estimates) are created equal so to help you understand the differences a little more, we’ve put together some comparisons for you.
Understanding the differences
An estimate is an educated guess at what your project may cost (usually verbally given), whereas, a quote is an exact price of what your project will cost subject to a specific time frame (should be in written form). When meeting for an initial consultation with a building contractor, they may go by a square-metre rate to provide you with an indication of what the final cost will be. This can be valuable if you’re after a fast idea of the type of price range you’ll be looking at but be aware that it can be a false assessment of the true end cost.
Depending on where you are at in the timeline of your project, the next step would generally be to go through the design and approvals stage. A professional builder should be able to offer you a preliminary package which includes concept designs, planning and final approvals.
After the preliminaries are complete, the building contractor should then provide you with a fixed price quote so you know exactly what you’ll be spending and receiving. Some builders may offer quotes for free but some may charge for them, regardless, you should expect to see a detailed scope of works with inclusions and exclusions as part of your quote.
A big tell-tale sign that you’re receiving an estimate and not a quote is if the builder tells you the price upon the first meeting or he provides a one or two page document where there is no detailed scope of works or inclusions/exclusions.
A professional builder will take it one step further
There are plenty of red flags to watch out for when dealing with an incompetent building contractor, but what about the signs that you’re dealing with a competent one? One thing to look out for which shows that you’re dealing with a professional builder is one who goes above and beyond.
A professional builder will not only provide you with a quote, but it will be in the form of a proposal. A proposal is much like a quote but with a little bit of sugar on top. Proposals include all of the information contained in estimates and quotes put together, but they take things a little further by showcasing the value in what you’ll receive.
They offer a more detailed scope of work, specific material selections, timelines, deliverables and costs, and are more specific than a quote. They’ll also showcase testimonials, company guarantees and have clear explanations of inclusions and exclusions.
A proposal is valuable when you’ve already decided to go ahead based on the estimates you’ve received for your project and you need to find the right building contractor. Unlike quotes, proposals are a lot of work and you should expect to pay for this as a professional service. You should expect to receive a 20-30 page document in a professional proposal which is a sure sign that you’re dealing with a professional builder.
Now that you’re aware of the difference between a quote and an estimate, you can feel more confident when speaking with builders about your project and can make a more informed choice based on quality and value.
To help assist you in the beginning stages of your project, read our free downloadable guide, 7 Questions You Must Ask Before Signing. It will help you select the right builder so you can stay on budget and avoid a disappointing experience.