Contractor asking for money for an Estimate?

Question

I’m in the process of purchasing a multifamily using a 203K loan. I’m reaching out to several contractors trying to get some estimates in place to bring to my lender. I had one contractor reach out to me and say the cost to go out there for a quote is $750 because everybody else is just guessing and they are actually going out there with the structural engineer and will be able to provide me a detailed quote. Is this normal?

Carlton B. · Answer

First I would call and ask why he is charging 750 maybe it is to pay for the report. if so you should be able to keep a copy. If that is the case why did the other contractors fail to get the report.

Nathan McBride · Answer

No way would I pay a contractor anything just to put together a quote.  Any legit contractor knows they will likely bid on 10 jobs with the hopes of winning one of them.  That's just the nature of the business.

Something to consider, a lot of contractors (especially small ones) are reluctant to work with loan programs like that because of all of the hoops the banks make them jump through to recieve payment.  They often don't carry enough cash to cover the float between paying subs and recieving payment from the bank.

If it's a major rehab, you might consider making the purchase with a construction loan from a local commercial bank and then refinancing to a 30-year loan product once construction is complete.

That would likely open up the contractor market some and likely get you better pricing on the rehab estimates.

Trevor Schmitt · Answer

Hard to say without knowing what the scope of work is. However, the $750 charge from a structural engineer is normal, but that should include an actual draft including specifics on what needs to be done. Not just a quote of how much it will be to do the work.

For example, I had to install some reinforcements in the basement of an older two-story home after opening up the main floor and installing a header (removing wall between kitchen and dining room.) Per city code, I had to have a structural engineer come out and give specifics on what type and how many boards were needed to fully support the altered structure. The cost for that I believe was exactly $750... but it wasn't a quote, it was for a service that was performed. Then I had my contractor complete the plans that the structural engineer gave me. I would suggest speaking with your lender, they may need something from a structural engineer anyway, or better answer your question.

Daren H. · Answer

Are you talking about a remodeling quote or a quote for a structural engineering to come and do an inspection of the foundation/structure of the property? I wouldn't pay a contractor $75 dollars let alone $750 for a rehab quote but I can understand contractors not wanting to waste their time for free as well. If you are getting a licensed structural engineer to do an inspection and provide a report then I could see $750 being the cost although high in my area. I pay $600 for pier and beam foundation inspections by a licensed structural engineer and $400 for slab foundation inspections. I dont pay any contractor for just coming out to give me a quote to remodel a property. Then again I have been working with the same contractors for years. I dont know your area but that sounds wild to me if its a remodeling quote.