What Minnesota law says an estimate must include
Every proposal, estimate, bid, contract and change order from a licensed Minnesota contractor must be in writing and include (Minn. Stat. 326B.809):
- A detailed summary of the work to be performed
- A description of the specific materials, or a list of standard features
- The total price, or how the price will be calculated
The contractor also has to give you written performance guidelines before you sign, and a signed, dated copy of every agreement and lien waiver at no charge. The contract must state the contractor's license number (326B.87).
Comparing bids
- Get at least three written bids for any significant project, and never accept an oral estimate (MN Attorney General).
- Compare scope, not just price. The Attorney General warns the lowest bid isn't necessarily the best, and an unusually low bid may be cause for alarm: some contractors bid low to get a foot in the door, then raise the price for “unforeseen circumstances.”
- Ask about big differences. The FTC says to ask for an explanation if there's a big difference among estimates (FTC).
- Be wary of cost-plus or time-and-materials-only pricing for a whole project, per the Attorney General (MN AG).
Allowances: the line that can move your price
An allowance is a budget placeholder for things you haven't picked yet, like tile, a vanity or light fixtures. NAHB's model contract describes allowances as amounts for fixtures and finishes that are selected by the buyer during construction, with any increase or decrease reflected on a signed change order (NAHB).
What to check: is each allowance realistic for what you actually want? A low allowance makes a bid look cheaper, then the difference shows up later. At cK Builders we spell allowances out in the estimate so there are no surprises.
Change orders
Minnesota law requires change orders to be in writing (326B.809). DLI says any change to the scope or price should be a written change order signed and dated by you and the contractor, and you get a copy when it's issued (MN DLI). The Attorney General adds that anything not in the contract can be treated as an extra that costs more, so get every promise in writing (MN AG).
Deposits and payment schedules
- Deposit: the Attorney General says a “good faith” down payment is customary but should be no more than a small percentage of the job, and to avoid a contractor who insists on a large one. DLI says a “modest percentage” (MN AG, MN DLI).
- Progress payments tied to work completed.
- Holdback: keep the final payment until inspections have passed and the job is complete (MN AG). The FTC says never make the final payment until the work is done and you're satisfied (FTC).
Liens and lien waivers
In Minnesota, subcontractors and suppliers who don't get paid can file a lien against your home, even if you paid your contractor. That's why every residential contract with subs or suppliers must include a state-required notice telling you about lien rights and your right to withhold payment until you get lien waivers (Minn. Stat. 514.011). Before final payment, get signed lien waivers from each subcontractor and supplier (MN AG, MN DLI). A contractor who's required to be licensed but isn't can't file a lien at all (MN AG).
License and insurance
Minnesota license numbers begin with BC (building contractor), CR (remodeler) or RR (roofer); numbers starting with IR are registrations, not licenses (MN DLI). Licensed contractors must carry liability insurance of at least $100,000 per occurrence and $300,000 aggregate for bodily injury, plus $25,000 property damage, and you can ask to see their workers' comp policy (MN AG). Hire licensed, and you're also eligible for the state Contractor Recovery Fund, which can pay up to $100,000 per owner if a licensed contractor commits fraud or fails to perform (326B.89, MN DLI).
Red flags
- Shows up unsolicited, or is “in the area” (FTC, MN AG)
- Pressures you for an immediate decision
- Wants full or substantial payment up front, or cash only
- Won't give a written estimate, contract or license number
- Asks you to pull the permits
- Asks you to sign an estimate “just to get started” before you've decided to hire them; you may be signing a contract (MN DLI)
- Offers to pay your insurance deductible, which Minnesota prohibits (Minn. Stat. 325E.66)