Three bids on the kitchen table. One is 25-40% lower than the other two. Same project, same house, roughly the same scope description. Your instinct says sign it — why pay more for the same work? But that instinct is wrong more often than it is right, and when it is wrong, the gap between the cheap bid and reality turns a $40,000 remodel into a $52,000 lesson.

The lowest bid is rarely the lowest cost. It is usually the lowest starting price with the highest probability of escalation, failure, or both. Here are the five ways that plays out, with real numbers.

1. Excluded scope that triggers change orders

The cheapest bid achieves its number by leaving things out. Not by working more efficiently — by quoting less work. The exclusions hide in fine print, sit on the last page, or simply vanish from the line items without being called out. Once the project starts and the missing work becomes unavoidable, the change orders arrive — at rates higher than the original bid.

Real scenario: A homeowner receives three bids for a primary bathroom remodel. Bid A: $38,000. Bid B: $47,500. Bid C: $52,000. The homeowner signs Bid A.

Three weeks in, the change orders start:

  • Plumbing rough-in for the relocated shower valve: $3,200 (Bids B and C included this)
  • Electrical relocation for the new vanity layout: $2,800 (Bids B and C included this)
  • Tile backer board (Kerdi or equivalent) for the shower walls: $2,400 (Bid A quoted tile installation but excluded substrate prep)
  • Exhaust fan replacement and ducting to exterior: $1,600 (Bids B and C included this)
  • Dumpster and debris removal: $1,400 (Bid A said "homeowner responsible for debris")

Total change orders: $11,400. Actual project cost: $49,400 — more than Bid B and within $2,600 of Bid C, but with the added stress, delays, and negotiation friction of five change orders mid-project.

How to catch it: Build a master scope checklist from the most detailed bid you received. Compare every item against the cheapest bid. Any item missing from the cheap bid is a future change order. Add those estimated costs to the cheap bid's total before making your decision.

2. Substandard materials that fail early

Material cost is the easiest place to shave a bid, and the hardest place for a homeowner to spot the cut. A contractor who quotes "LVP flooring" without specifying the product can install $2.50/sq ft builder-grade vinyl plank or $4.50/sq ft mid-range product. Both are technically "LVP flooring." The difference is that the $2.50 product has a 2mm wear layer that delaminates under furniture legs in 2-3 years, while the $4.50 product has a 12mil+ wear layer rated for 15-20 years of residential use. Same words on the bid. Completely different product in your house.

  • Flooring: Builder-grade LVP at $2.50/sq ft vs. mid-range at $4.50/sq ft. On 500 sq ft, the material savings is $1,000. The replacement cost in 3 years — demolition, disposal, new material, labor — is $3,500-$5,000.
  • Paint: Contractor-grade flat latex at $25/gallon vs. premium eggshell at $55/gallon. The cheap paint needs two coats for coverage, scuffs under a damp cloth, and cannot be wiped clean. Repainting a 200 sq ft kitchen in 18 months costs $800-$1,200 in labor alone.
  • Countertops: Unbranded imported quartz at $38/sq ft vs. Caesarstone or Silestone at $62-$85/sq ft. The import may have inconsistent pigmentation, visible seams, and no manufacturer warranty. A seam crack in year two means $3,000-$5,000 to replace a 45 sq ft countertop.
  • Cabinets: Particleboard boxes with melamine interiors at $150/linear ft vs. plywood boxes with dovetail drawers at $400/linear ft. Particleboard swells on contact with moisture — under the sink, near the dishwasher, around the ice maker line. Replacing a swollen cabinet base costs $600-$1,200 per unit including countertop removal and reinstallation.
Red flag: Any bid that lists materials by category ("tile," "countertops," "cabinets") without specifying the manufacturer, product line, or SKU is reserving the right to install whatever maximizes their margin. Demand product specifications in writing before signing.

3. Uninsured or underlicensed subcontractors

A general contractor who bids 30% below market often gets there by subcontracting to unlicensed or uninsured workers. The GC pockets the margin between what they charge you and what they pay the sub. The sub works without workers' compensation insurance, without a trade license, and without accountability if the work fails inspection. You pay less on paper. You absorb the risk in practice.

Real scenario: A GC subs out the electrical work on a kitchen remodel to an unlicensed electrician. The scope: 4 new dedicated circuits, GFCI protection, under-cabinet lighting. The unlicensed sub charges the GC $1,800. A licensed electrician would charge $3,200-$4,500. The bid looks $1,400-$2,700 cheaper.

The electrical inspection fails. The inspector flags improper wire gauge on the range circuit, missing arc-fault protection, and under-cabinet fixtures wired without a junction box. The GC's unlicensed sub disappears. A licensed electrician tears out and redoes the work: $4,800. The homeowner paid for the electrical twice — once in the original bid, once in the correction — for a total of $6,600 instead of $3,200.

The financial hit is bad enough. But unlicensed electrical and plumbing work can also void your homeowner's insurance, create code violations that surface at your next home sale, and in the worst case, cause a fire or water damage that your insurer denies because the work was performed without a permit.

4. Abandoned projects

A contractor who bids 40% below everyone else may not be running a lean operation. They may be insolvent. The low bid is how they collect deposits and progress payments to plug cash flow holes on other jobs. When the money runs out, the work stops. Your half-demolished bathroom is not their problem anymore.

What abandonment costs: A contractor completes 60% of a $45,000 bathroom remodel and stops showing up. The homeowner has paid $31,500 (70% of the contract, front-loaded). The completed work is valued at approximately $27,000. The homeowner is overpaid by $4,500 and has a bathroom with exposed framing.

Hiring a completion contractor costs 20-40% more per unit than the original bid because the new contractor must:

  • Assess and document the existing work: $500-$1,000
  • Correct deficiencies in the previous contractor's work: $2,000-$5,000
  • Complete the remaining 40% at their own rates: $12,000-$16,000

Total project cost: $46,000-$52,500 — more than the highest original bid, plus months of delay, a half-demolished bathroom, and the stress of litigation to recover the overpayment.

Red flag: A contractor who quotes 40%+ below the other bids, asks for a large upfront deposit, and cannot provide references for projects completed in the last 90 days is exhibiting a pattern. The low bid gets them in the door. The large deposit funds their exit.

5. Warranty evasion

A reputable contractor provides a 1-2 year workmanship warranty: if the tile grout cracks, the cabinet door warps, or the paint peels, they come back and fix it at no cost. Simple enough. But a warranty is only as good as the entity standing behind it — and the cheapest bidder has three ways to make sure that entity barely exists.

  • No warranty at all — The contract has no warranty clause, or the contractor verbally says "we stand behind our work" without putting it in writing. Verbal warranties are unenforceable. When the shower tile leaks 8 months after completion, you pay for the repair.
  • Warranty from a disposable LLC — The contractor operates as "Premier Kitchen & Bath LLC," incorporated 14 months ago. The LLC will be dissolved within 6-12 months of your project's completion and replaced with a new entity. Your warranty is against a company that no longer exists. Filing suit against a dissolved LLC is expensive and usually futile.
  • Warranty with exclusions that swallow the coverage — "Warranty excludes damage caused by normal use, moisture, temperature changes, settling, or movement." Since every material is affected by at least one of those conditions, the warranty effectively covers nothing.
How to verify: Ask how long the contractor has operated under their current business name and license number. Check the state licensing board for the license issue date. A contractor with a 10-year track record under the same license is a fundamentally different risk than a contractor with a 14-month-old LLC. Both can be licensed. Only one will be around to honor a warranty.

How to evaluate the cheapest bid properly

Do not reject the cheapest bid automatically. Sometimes a contractor is genuinely more efficient, carries lower overhead, or is pricing competitively to win work in a slow season. The goal is not to dismiss the low number — it is to figure out whether the low number is real or just the opening act.

  • Check license status — Verify the contractor's license is active, current, and matches the type of work being performed. A general building contractor license is different from a specialty license. Use your state's online license lookup tool.
  • Verify insurance certificates — Ask for a certificate of insurance (COI) showing general liability ($1M minimum) and workers' compensation coverage. Call the insurance company to confirm the policy is active. A COI can be fabricated or expired.
  • Call references for projects completed 12+ months ago — Not references from last week. You want to know how the work held up after a year. Did the contractor return for warranty items? Did the paint hold? Did the tile crack? A 12-month reference reveals durability. A 2-week reference reveals nothing.
  • Compare scope against the most detailed bid — Use the most detailed bid as the benchmark. Every item in that bid missing from the cheapest bid is a potential change order. Add those items at market rates and compare again.
  • Ask about subcontractors — "Will you be using subcontractors for electrical, plumbing, or tile? Are they licensed and insured?" A contractor who hesitates or claims "I handle everything myself" on a project requiring licensed trades is either lying or unlicensed for those trades.

The evaluation math: You receive three bids: $38,000, $47,500, $52,000. After normalizing scope (adding excluded items to the cheap bid), the real comparison is $49,400 vs. $47,500 vs. $52,000. The cheapest bid is now the most expensive of the first two options. The middle bid, from a contractor with 8 years under the same license, verified insurance, and a 2-year workmanship warranty, is the actual low-cost option.

The real decision

Never sign the cheapest bid without normalizing scope, verifying credentials, and checking references from completed projects — not projects in progress. The lowest number on the page is a starting point for analysis, not a reason to sign.

The question is never "which bid is cheapest?" The question is "which bid will still be the cheapest after change orders, material failures, and warranty claims?" Those are two very different numbers — and the contractor offering the low bid is counting on you not to do the math.

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