Why should you pay for an estimate?

Why should you have to pay a builder to give you an estimate?

Surely that’s the cost of doing business and builders should provide an estimate to their prospects free of charge so the consumer can decide if the project is within their budget…

That’s how other industries operate so why do some builders charge while others offer free estimates?

The problem lies in the language and the fact that the terms "builders estimate" and "builders quote" are often used interchangeably. 

However, there is a subtle difference between the two, and it's one that could cost you hundreds of thousands of dollars…

Builder's Estimate vs. Builder's Quote

A builder's estimate is a rough calculation of the likely cost of a project. 

It is based on the builder's experience and expertise, but it is not a binding agreement or a final price. 

An estimate is typically provided early in the process, when the project is still in the planning stages, and is used to help the client get a sense of the potential cost of the project.

A builder's quote, on the other hand, is a more detailed and specific document that outlines the actual cost of the project. 

It takes into account all the necessary materials, labour, and other costs associated with the project and provides a fixed price that the client can rely on. 

A quote is typically provided after the builder has done a detailed assessment of the project and has a clear understanding of the client's needs and requirements.

The True Cost and Value of Detailed Assessment

And there lies the problem. Because a detailed assessment takes a builder approximately 40-80 hours depending on the complexity of the project.

Obviously, staff have to be paid and other resources engaged in order for the builder to establish a contract that can be fixed for the client so the actual cost involved in quoting a project is around $5,000.

With a win ratio of one in ten for the building companies that quote plans for free, that means they have to add $50,000 to each job they win just to cover the cost of the ones they don’t!

This is probably why they lose so many jobs based on price!

The other problem for those builders that choose to estimate for free rather than being paid to provide a professional quote, is that they are forced to fill their estimate with allowances.  

This practice protects them from any financial exposure when they underprice an item as well as making their ‘estimates’ look extremely cheap.

A common myth amongst consumers is the belief that an estimate that is $200,000 below a professional builder's fixed price quote is unlikely to increase to the point that it becomes more expensive.

Unfortunately, that is a very common and costly mistake made by consumers on a tight budget. 

The fact is, 75% of builders work on net margins of less than 3%, therefore you won’t be able to negotiate a massive discount on your next home regardless of how good you are at poker.

When you choose the builder with the lowest price, you still pay the real price in the end…albeit with delays and disputes on top of all those contract variations generated by unrealistic allowances in your building contract.

The solution is to enter into a Preliminary Service Agreement with a professional building company that will provide a high-quality, accurate estimate.

What paid quotes can tell you about the builder

Not only are builders who charge for quotes more likely to be more experienced and professional, but they also have a higher level of expertise in their field. 

Additionally, they are more selective regarding the projects they take on which ensures that they only take on projects that are a good fit for their expertise and resources. 

By charging for quotes, they can weed out projects that are not a good match, and focus their efforts on projects that they are well-suited to handle.

Remember, a quote that has allowances is not a quote, it’s an estimate…

And if it’s not listed in the quote, then it’s not included in the price!     

It doesn’t matter if you are building your first home or if you have built many times before…

Designing a new home can be very overwhelming and when you hear new things for the first time, it's not easy to remember everything.

All the tips I’ve covered here are just a small sample of the information I need to share with you to ensure you are well informed when you get started on the design process... 

Which is why I put together a quick guide for you to download. 

The 7 Things You Must Know Before Designing A New Home.

It’s completely free, and it will help you to avoid any nasty surprises that can sneak up on you when building a custom home.

Just click on the link below and let me know the email address you'd like me to send it to.