The Cheapest Contractor Cost the Most

[Drago Stanimirovic]

A few years ago, we were comparing bids for a renovation project.

Three contractors walked through the property. Three estimates landed on the table. One of them was significantly lower than the other two.

At first, it felt like an easy decision. The contractor seemed confident. He had good energy, answered questions quickly, and his price was thousands of dollars below the others. Who wouldn't want to save that kind of money?

But instead of looking only at the total, we started comparing the estimates line by line.

That's when things changed. The lower price didn't include permits. Cleanup was extra. Several repairs were listed as "if needed," even though everyone knew they'd almost certainly be needed. Painting wasn't included. Neither was hauling away debris.

There were also a few vague phrases that made me nervous: "To be determined," "Subject to inspection" and "Additional charges may apply."

Now, none of those items looked expensive on their own. Together, they completely changed the picture.

By the time we added everything that the other contractors had already included, the cheapest bid wasn't the cheapest anymore. In fact, it would've been the most expensive if we'd signed it.

That experience has stayed with me, and not just when hiring contractors. I see the same thing with financing, insurance, and almost every other service in real estate.

People naturally compare the number at the bottom of the page. I get it. We all do.

But the more important question is whether you're actually comparing the same product. 

A lower rate, a lower fee, a lower bid... None of those automatically mean a better deal.

Sometimes they do. Sometimes they simply mean someone left part of the story out.

These days, when I see the lowest number, I don't ask, "Why is it so cheap?" I ask, "What's missing?" That question has probably saved me more money than chasing the lowest price ever has.

(Have you ever accepted the lowest bid, only to realize later that it wasn't really the lowest after all?)