New construction is predictable. We're working from a clean set of plans on a clean, empty lot. A renovation... a renovation is archaeology. You never really know what you're getting into until you open up a wall. And I've found that the house's "secrets" are always in the walls.
We were opening up a kitchen in a 1980s-era home in Bonita Springs. The client wanted to take down a wall to create an open concept. Simple enough. But when we cut the first hole in the drywall, we found... everything. A main plumbing stack, a major HVAC chase, and electrical wiring that looked like a rat's nest. And none of it was to code.
The client was, understandably, panicked. "That wasn't in the budget!" they said. I pointed to the line item in our contract labeled "Contingency." The "wall" job just became a "re-route half the house" job. We had to bring in a plumber, an electrician, and an HVAC tech just to clear the wall before we could even think about removing it.
A good contractor is honest about this before the job starts. The contingency fund isn't a "maybe" or an "upsell." It's a non-negotiable part of the renovation budget. It’s the "We Will Find Something" fund.
My professional recommendation: If you get three bids for a major renovation and one is significantly cheaper, it's almost always because they have a non-existent or tiny contingency fund. They're planning for the best-case scenario. A professional contractor plans for reality. Insist on a contingency of 15-20% for any major renovation, and treat it as a real cost. If you don't use it, it's a bonus. But if you do need it, it's what saves your project from disaster.