Bids vs. Estimates
When it comes to construction the questions seems to come up, which is better to get, a bid or an estimate? While the answer to this question is very straightforward, it is still something that gets confusing, especially because you really should get both. So, let's take a look at things like this, you should definitely get bids and do your own estimates, this takes time, but it gives you the most realistic idea of cost estimation you can find.
What is a bid? What is an estimate? A bid is an amount that a sub will do a job for, what it will cost, what is included, and the timeframe. An estimate is your idea of what a job will cost, it is usually found by looking at supplies, calculating the cost of how much you need, and then estimating labor on top of that.
So, the way it works is this, you put together your estimates first, then you get bids. This means if you estimate a job will cost you $600 for instance, but your lowest bid is $750, you need to take that difference into consideration because obviously you missed the boat somewhere, or you just haven't looked hard enough for a sub that will give you a good deal.
Basically an estimate is going to help you create a budget, and get an idea of where your bids should be coming in at. If you find that the cost of the concrete to lay your foundation is $15,000, and your bids are coming in at $25,000, you know that you are going to be paying a high mark up or huge labor costs, so an estimation will save you thousands in this instance.
Whenever you can get a bid and do your own estimate, do it. However, if the bid is reasonable, don't spend hours calculating out the amount of concrete you need, especially if every bid you get includes concrete costs. Sometimes you can find people that will just give you labor bids, but in some areas it might be hard to find a contractor that doesn't provide the concrete with their bid, so if you went out and priced out concrete and figured out just how much you needed, you wasted time because you won't be the one buying it.
Each area has their own little unique ways of doing things. You can always ask the subs and supplier why they do things that way, and if they say that they don't really know they just do, you don't want to fight them. Generally if you try to fight it, it will end up costing you more. Find out the local and established business practices, and use them to your advantage. If you find that your bids are way higher than your estimates put them at, first double check your estimates, and then see if you can find labor only options, often times bids come in too high because you will be paying a premium for supplies you could buy yourself a lot cheaper.
A bid is better than an estimate, so that answers your question, if you were to do one of the other, the bids would be the most important. Why? Well, a bid is deadly accurate about how much something will cost you. If they say they will do it for a price, they will, Remember, both you and your lender will want to see written bids. A verbal bid is never as good. If the bid is signed it can even be used as a legal contract. In real estate if it is not in writing it doesn't matter, and won't hold up in court or anywhere else, so remember to get everything in writing.
