How to compare contractor bids for your home renovation

Written by the Square One team

Updated July 9, 2024 | Published November 17, 2018

Your home is your greatest asset, and your biggest expense. So, it stands to reason that when you decide to renovate, you’ll take as much care choosing your contractor as you did choosing which home to buy.

But where to begin? As with any major purchase, you’ll want to make comparisons, in order to make an informed decision. It’s best to compare at least three bids. But first, as Mom always told you, do your homework!

Two contractors looking at a floor plan

The important points

  • When requesting quotes from contractors, provide as much detail about the project as possible.
  • Make sure the quotes include a breakdown of material and labour costs, subcontractors, a payment schedule, and other important information.
  • Don’t just choose the lowest bid — make sure your chosen contractor is of high quality (not to mention licensed and insured).

The devil is in the details

Male contractor reviewing plans and newly built house

The more details you provide to your prospective contractor, the better the chances are that you will get an accurate estimate. More details upfront means fewer surprises later!

Provide architectural plans, specifications, and a full list of what needs to be done, as well as the types of materials you plan to use. Even if you haven’t yet chosen the exact finishes, be specific about the type of materials you plan to choose.

For example, do you want a wood floor or a tile floor installed? Do you require crown molding? Specialty baseboards? The types of materials used will have a direct impact on the cost of the job.

An equal playing field

In order to be able to make an accurate comparison, ensure that you provide each contractor with exactly the same information. If you alter or edit the job description or scope, or if a contractor asks a question and you provide clarification, make sure that you provide the updated information to all of those bidding for the job.

The breakdown

Ask each contractor to break down the cost of materials and labor, miscellaneous expenses, sub-contractor details, and their profit margin.

What about contingencies? Experienced contractors will include a certain amount for unforeseen expenses.

A payment schedule should also be included in the bid. If a contractor asks for 50 percent upfront, this may be a sign that they have financial difficulties, or is worried that you won’t want to pay due to poor quality of the work.

For large projects, reputable contractors will ask for 10 percent upon signing the contract, 3 payments of 25 percent spaced over the duration of the project, and the final 15 percent to be paid upon completion of the project, once the client is completely satisfied. Be wary of anyone straying too far from this formula.

Here comes the tricky part: each contractor will likely have a different method of writing out the quote, so it will be up to you to interpret and compare one bid to the next.

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Ask Questions

Again, homework! Research your prospective contractors. How long have they been in business? Are they licensed and insured for liability and worker’s compensation? Will they provide warranties in writing? How long will the job take? How often will they be on site? What will be your communication method? Is any of the work going to be sub-contracted? If so, ask for an explanation of how that works.

And most important, ask for references! Follow up and ask to visit projects in progress as well as completed ones, in order to judge the quality of the work. Speak to the other homeowners and ask them about their level of satisfaction, and any watch-outs. Also, check with your local Better Business Bureau and Consumer Protection Agency to ensure no claims have been filed against your prospective contractors.

Determining who to pick

Two men reviewing house construction and renovation plans

Once you’ve narrowed your choice down to the final few candidates, study the bids carefully.

It may be tempting to jump at the cheapest bid, but remember, if it seems too good to be true, it probably is. Shoddy or rushed work is never a bargain. Also remember that the most expensive doesn’t always mean the best, either. Typically. a contractor’s profit margin should be 15 to 20 percent. Anything higher should set off alarm bells.

So, assuming you are comfortable with all the other factors, choose someone from the middle of the pack.

Last but not least, go with your gut. Do you have a good feeling about the person you have chosen? They will be spending a lot of time in your home. Will you be able to communicate and work well with him or her?

Remember, for best results in choosing your contractor, be S.M.A.R.T. !

  • Specify– materials, design details, expectations and scope of work.
  • Manage – all updates and changes in order to maintain an equal playing field for all bidders.
  • Assume nothing – get everything in writing.
  • References – get them and follow up on them.
  • Time– take your time and do your homework before making your decision.

Want to learn more? Visit our Home Improvement resource centre for tips and inspiration for your next big home improvement project. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.


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