Reading a builder's estimate: seven questions that matter

Two estimates for the same project can differ substantially without either being dishonest. They assume different things, and the assumptions are usually not on the front page.

An estimate is not a price. It is a document about assumptions, and reading it well means reading for what it assumes rather than what it totals.

Seven questions do most of the work.

1. What is explicitly excluded?

Exclusions are where the surprises live. A low bid is frequently a narrower scope rather than a better price, and the difference only becomes visible when the excluded item turns out to be necessary.

Look for the common ones: site work, utility connections, landscaping, driveways, retaining, permits and fees, engineering, temporary services, and anything described as "by owner." None of those disappear because they were excluded. They just move to a different line in your life.

2. What is an allowance, and at what level?

An allowance is a placeholder for something not yet chosen. The number matters less than what it actually buys.

Ask the estimator to show you what the tile allowance, or the fixture allowance, actually purchases. If nobody involved would install that product in this house, the allowance is understating the eventual cost, and the gap will arrive as a change order.

3. Is there a contingency, and who controls it?

Custom construction encounters unknowns. A budget without a contingency is not optimistic, it is incomplete.

The more revealing question is who holds it. A contingency the builder controls and a contingency the owner controls behave very differently when something unexpected appears. Neither arrangement is wrong, but the estimate should say which it is.

4. How are changes priced?

Changes will happen. On a custom project the number is never zero, and any process that pretends otherwise is setting up a difficult conversation later.

What matters is whether the pricing method is agreed in advance — a defined markup, a rate schedule, a stated approach — or negotiated in the moment, when the work is already in the way and the leverage is unequal. Agreeing the method before it is needed is worth more than arguing about the number afterwards.

5. What schedule does this assume, and what happens if it slips?

Schedule is a cost. Extended general conditions, supervision, equipment and financing all continue while a project runs long.

An estimate built on an optimistic schedule is carrying an unpriced risk. Ask what the assumed duration is, what the main risks to it are, and how a slip is handled commercially.

6. Were site conditions investigated or assumed?

An estimate written without a site visit is guessing about the variable that moves cost most.

Slope, soil, drainage, rock, access and trees all change the number, and in the Austin area expansive soils and tree protection rules under the City of Austin Development Services Department are routine considerations rather than edge cases. If the estimate does not reference the actual site, it is pricing a generic house.

7. What drawings is this priced against?

This is the question that explains most of the variance between competing bids.

An estimate against schematic drawings and an estimate against permit-set drawings are different instruments with different reliability. The first is an informed range. The second is an actual takeoff. Comparing them side by side as though they are the same thing is how people select the least-developed estimate and then experience it as a price increase.

Always establish which stage each bid was priced from before comparing totals.

A note on comparing bids

The instinct is to line up totals. The more useful exercise is to line up exclusions and allowances, and then normalise.

Frequently the cheapest bid becomes the most expensive one after you add back what it excluded and adjust the allowances to a level anyone would actually accept. That is not always a sign of anything sinister — narrower scopes are legitimate — but it means the totals were never comparable in the first place.

And a note on what an estimate is not

A preliminary estimate is informational. It can change after site review, plans, specifications, permits, engineering, allowances, selections, schedule, subcontractor pricing and taxes. A final price, scope and allocation of responsibility require a written agreement signed by the appropriate parties.

Any builder describing a preliminary number as a guaranteed price is either using the words loosely or telling you something that will not survive contact with the site. Both are worth knowing early.