Cost estimate

Cost Estimate - A cost estimate is a detailed breakdown of the anticipated costs for a construction or renovation project, prepared by a tradesperson or contractor based on the planned scope of work. It serves as a basis for the client’s decision-making and as a basis for the contractor’s calculations. Legally, the cost estimate is a non-binding cost estimate - in contrast to a fixed-price offer.

Legal Classification

According to Section 650 of the German Civil Code (BGB), a cost estimate is, in case of doubt, not subject to remuneration - the tradesperson may not charge for preparing it unless this was agreed upon in advance. In terms of content, the cost estimate is an estimate and not a guaranteed fixed price. However, the actual invoice may not significantly exceed the estimate - case law sets the limit at approximately a 15-20% deviation. If an overrun is foreseeable, the contractor must immediately inform the client (Section 650(2) BGB), who then has the right to terminate the contract.

Case law is not entirely uniform in its assessment of what “significant” means. Some courts have also classified deviations of 10% or more as significant if the contract implied particular cost certainty. The safest course of action for clients is therefore to expressly agree in the cost estimate at what percentage a deviation is considered significant and triggers an immediate duty to inform.

Distinction from a Quote

A quote (fixed-price quote) is legally binding-the contractor must perform the service at the stated price. A cost estimate is an estimate with a margin of error. In construction practice, this distinction is important: Anyone who needs cost certainty should request a binding quote based on a bill of quantities. Those who only need a rough estimate can work with a cost estimate.

The problem is that, in practice, many tradespeople use the terms “quote” and “cost estimate” interchangeably without considering the legal distinction. In the event of a dispute, it depends on how the document is structured: If it contains individual unit prices and quantities to be billed later, this tends to indicate a cost estimate. If the amount is listed as a flat rate for a fully described service, it constitutes a binding offer.

Comparing Multiple Cost Estimates

Comparing multiple cost estimates is a proven method for creating market transparency and avoiding unnecessary additional costs. The following points should be noted:

• All providers must calculate the same scope of services-different scopes of services make prices incomparable
• The quality of materials should be equivalent (e.g., comparable tile categories, same plaster thickness)
• Incidental costs such as construction waste disposal, protective measures, and cleaning should also be specified
• Payment terms (installment vs. final payment model) can influence cash flow planning

A price difference of more than 30% between two quotes is a red flag: Either a contractor has omitted essential items, or one is calculating with inappropriately low-quality materials.

Practical Tip for Homeowners in Nuremberg

We recommend that homeowners in the Nuremberg metropolitan area obtain at least three cost estimates from different contractors for major renovation projects and compare the items in detail. Make sure that all providers are calculating the same scope of work-differing scopes of work make cost estimates difficult to compare. Agree in writing that the contractor will inform you immediately if costs exceed the estimate by more than 10%. In Nuremberg, tradespeople are in high demand-plan for lead times of several weeks to receive the quotes. Those who need tradespeople’s services on short notice often have to accept a surcharge.

Frequently Asked Questions

Can the contractor charge for the cost estimate?

Only if this was agreed upon in advance. Without such an agreement, the cost estimate is free of charge under Section 650 of the German Civil Code (BGB). In practice, some contractors charge a fee for complex cost estimates (e.g., involving measurements and detailed planning), which is billed when the contract is awarded. Be sure to ask in advance.

What can I do if the final bill significantly exceeds the estimate?

An excess of more than 15-20% constitutes a material deviation. If the contractor did not inform you in a timely manner, you can contest the additional costs. If they did inform you in a timely manner and you did not cancel the contract, you must bear the higher costs. In the event of a dispute, it is advisable to seek legal counsel.

Is a verbal cost estimate valid?

In principle, yes-but in practice, a verbal cost estimate is difficult to prove. We strongly recommend always obtaining cost estimates in writing, with a detailed breakdown of individual items, material costs, and labor hours. This is the only way to have a solid basis in the event of a dispute.

How detailed should a cost estimate be?

The more detailed, the better. A good cost estimate lists all individual items with a description, quantity, unit, and unit price. General phrases like “Complete bathroom renovation €8,000” are problematic: they lack transparency regarding what is included and do not allow for cost control. Insist on a breakdown that lists each item in detail.

How do I handle change orders?

Change orders are services that arise after the original written estimate or contract has been finalized. They often occur when unforeseen damage is discovered during renovations-such as deteriorated pipes behind the wall, mold in the subfloor, or missing insulation layers. A change order must always be agreed upon in writing and approved by the client before the contractor performs the additional work. Anyone who receives change order claims only after the work is completed, without having approved them in writing beforehand, has strong grounds to argue against an obligation to pay-but in return cannot prevent a disputed change order from causing delays. In Nuremberg and the metropolitan region, we recommend including a clear written-form clause for add-ons in the construction contract for all renovations with a contract value of 5,000 euros or more: “Additional services will only be compensated if they were commissioned and confirmed in writing prior to execution.”

Back to the Real Estate Glossary.