Red Flags in an ADU Contractor Bid That Should Worry You

Recognizing Danger Signs in ADU Contractor Bids

When you receive a bid from an ADU contractor, it can be difficult to know what is normal and what should raise alarm bells. Many California homeowners, excited about their ADU project, overlook warning signs in contractor bids that later lead to budget overruns, construction delays, or outright fraud.

In this comprehensive guide, we will identify the most common red flags in ADU contractor bids, explain why each one matters, and give you actionable steps to protect yourself and your investment. Whether you are building a detached ADU, converting a garage, or adding a JADU, knowing what to watch for can save you tens of thousands of dollars.

Pricing Red Flags

1. The Bid Is Dramatically Lower Than Others

If you collect three to five bids (as recommended in our guide on how many ADU bids to get) and one comes in 25% or more below the others, that is a major red flag. In the competitive California ADU market, legitimate contractors cannot offer dramatically lower prices unless they are cutting corners somewhere.

Common reasons for abnormally low bids include:

• The contractor has missed key scope items that will appear later as expensive change orders
• They plan to use substandard materials or unlicensed subcontractors
• They are desperate for work due to cash flow problems
• The bid is intentionally low to win the job, with plans to increase the price through change orders (a practice known as "bid shopping")
• They are not including required permits, inspections, or utility connections in the price

The CSLB specifically warns homeowners that unusually low bids are one of the most common indicators of potential problems with a contractor.

2. Vague or Missing Line Items

A professional ADU bid should include a detailed breakdown of costs by category. If a bid presents only a single lump-sum number without any breakdown, you have no way of knowing what is included or excluded. This makes it impossible to compare bids accurately and gives the contractor room to claim that certain work was "not included" once construction begins.

3. No Allowances for Material Selections

Allowances are budget allocations for items you have not yet selected, such as flooring, countertops, lighting fixtures, and plumbing fixtures. A bid without allowances either means the contractor has already selected your materials for you (which limits your choices) or that these costs will be added on top of the bid price later.

4. Suspiciously Round Numbers

Construction costs are inherently messy. A bid with only round numbers (e.g., "Electrical: $10,000, Plumbing: $15,000, Framing: $20,000") suggests the contractor has not done a thorough estimate. Detailed estimates produce precise numbers that reflect actual material costs, labor hours, and subcontractor quotes.

Scope and Documentation Red Flags

5. Missing Scope Items

Compare each bid carefully against your project plans. Common items that contractors "forget" to include in their bids are:

• Utility connections: Water, sewer, gas, and electrical connections to the main house or street can cost $5,000 to $25,000 or more in Los Angeles
• Site preparation: Grading, demolition of existing structures, tree removal, and soil testing
• Permits and fees: Building permits, plan check fees, school fees, and utility connection fees
• Landscaping: Restoring the yard after construction, including hardscaping, planting, and irrigation
• Final inspections and certificate of occupancy: The work required to pass all final inspections
• Temporary utilities: Temporary power and water during construction

6. No Written Scope of Work

If a contractor provides a verbal estimate or a handwritten note instead of a formal, typed bid with a detailed scope of work, run. California law (Business and Professions Code Section 7159) requires contractors to provide a written contract for any home improvement project over $500. The contract must include a detailed description of the work to be performed, the agreed-upon price, and a payment schedule.

7. Unrealistic Timeline

A typical detached ADU in California takes 8 to 14 months from permitting to completion, with 4 to 6 months of that being actual construction time. If a contractor promises to complete your ADU in half that time without a clear explanation of how, be skeptical. Rushed timelines often lead to code violations, failed inspections, and quality issues.

Payment and Contract Red Flags

8. Demands for Large Upfront Payments

California law limits the amount a contractor can collect as a down payment to either $1,000 or 10% of the contract price, whichever is less (Business and Professions Code Section 7159.5). Any contractor who demands a larger upfront payment is violating the law and should be avoided. This rule exists because large upfront payments leave homeowners vulnerable if the contractor abandons the project or goes out of business.

9. Cash-Only Payment Requirements

Legitimate contractors accept checks, credit cards, or bank transfers. Contractors who insist on cash-only payments may be trying to avoid tax reporting, hide income from creditors, or make it difficult for you to dispute charges or prove payment later. Always pay by check or electronic transfer so you have a paper trail.

10. Front-Loaded Payment Schedule

Even within the legal limits, some contractors structure their payment schedule so that the majority of the money is due early in the project. A fair payment schedule ties payments to completed milestones. The contractor should never be significantly "ahead" on payments relative to the work completed.

11. No Mention of Lien Waivers

A professional bid and contract should address lien waivers. These are documents signed by the contractor and subcontractors confirming they have been paid for their work. Without lien waivers, a subcontractor or material supplier who was not paid by the general contractor can place a lien on your property, even if you already paid the general contractor in full.

Licensing and Insurance Red Flags

12. Unlicensed or Improperly Licensed Contractor

In California, any contractor performing work valued at $500 or more must hold a valid CSLB license. For ADU construction, you typically need a Class B (General Building) license holder. Verify the contractor's license through the CSLB online lookup tool. Check for active license status, any disciplinary actions or complaints, workers' compensation insurance, and the correct license classification for your project.

13. No Proof of Insurance

Your contractor must carry general liability insurance and workers' compensation insurance. Ask for a Certificate of Insurance (COI) and verify it directly with the insurance company. If a contractor is uninsured and a worker is injured on your property, you could be held liable. The minimum recommended general liability coverage for ADU projects is $1,000,000 per occurrence.

14. No Bond Information

California requires licensed contractors to carry a contractor's license bond. This bond protects homeowners if the contractor fails to complete the work or violates building codes. Ask for the bond number and verify it is current.

Communication and Professionalism Red Flags

15. Pressure to Sign Immediately

A legitimate contractor will give you time to review their bid, ask questions, and compare it with other proposals. High-pressure sales tactics like "this price is only good today" or "I have another client who wants this spot" are manipulation techniques. California law gives homeowners a three-day right to cancel any home improvement contract signed in their home (Civil Code Section 1689.5 to 1689.14).

16. Poor Communication During the Bid Process

How a contractor communicates during the bidding phase is a preview of how they will communicate during construction. If they are slow to respond to emails, fail to return phone calls, miss scheduled meetings, or provide unclear answers to your questions, expect the same behavior once construction begins.

17. Unwillingness to Provide References

If a contractor cannot or will not provide references from recent ADU clients, this is a significant warning sign. Every reputable contractor should have satisfied clients who are willing to speak on their behalf. For more on evaluating contractors, see our guide on evaluating ADU contractor portfolios.

18. No Physical Business Address

Legitimate contractors have established business addresses, not just P.O. boxes or cell phone numbers. A physical office or showroom indicates that the contractor is invested in their business and is less likely to disappear mid-project. Learn what happens when a contractor goes AWOL in our article on what to do if your ADU contractor goes out of business.

What to Do If You Spot Red Flags

Step 1: Ask Direct Questions

Sometimes what appears to be a red flag has a legitimate explanation. Before eliminating a contractor, ask them directly about your concerns. Their response will tell you a lot about their professionalism and transparency.

Step 2: Verify Independently

Do not take the contractor's word for it. Verify their license, insurance, and references independently. Check court records for lawsuits and the CSLB for complaints.

Step 3: Trust Your Instincts

If something feels wrong, it probably is. Your ADU is a major investment, and you should feel comfortable and confident with the contractor you choose. Never let price alone override legitimate concerns about a contractor's credibility.

Step 4: Document Everything

Keep copies of all bids, emails, text messages, and notes from phone calls. If a dispute arises later, this documentation will be invaluable. Learn more about contract protections in our guide on what your ADU contract should include.

Frequently Asked Questions About ADU Bid Red Flags

What is the most common red flag in ADU contractor bids?

The most common red flag is a bid that is significantly lower than all others. While every homeowner wants to save money, abnormally low bids almost always lead to problems. The low price is typically achieved by omitting key scope items, using inferior materials, or planning to add costs through change orders during construction. According to the CSLB, low-ball bidding is the single most common complaint-generating practice in California's construction industry.

Should I automatically reject a bid that has one or two red flags?

Not necessarily. Minor red flags like slightly round numbers or a less-detailed-than-ideal breakdown may simply reflect the contractor's bidding style rather than dishonest intent. The key is to address your concerns directly with the contractor and see how they respond. However, major red flags like demands for large upfront payments, lack of licensing, or pressure to sign immediately should be deal-breakers.

How can I tell if a contractor is planning to hit me with change orders?

Look for vague scope descriptions, missing line items, and suspiciously low prices. Contractors who plan to increase the price through change orders often submit bids that are intentionally vague about what is included. They may also use phrases like "as needed" or "to be determined" for key cost items. A detailed, specific bid with clear inclusions and exclusions is your best protection against change order surprises.

Is it a red flag if the contractor does not have an office or showroom?

While many legitimate small contractors operate from home offices, the lack of any physical business presence should raise your awareness. At minimum, the contractor should have a dedicated business phone number, a professional email address, a website or social media presence, and a physical mailing address. A contractor who can only be reached via a personal cell phone and Gmail address may not be established enough for a major ADU project.

What legal protections do California homeowners have against bad contractors?

California homeowners are protected by several laws including the Contractor's License Law (Business and Professions Code Sections 7000-7191), the Home Improvement Contract requirements (Section 7159), the down payment limits (Section 7159.5), the three-day right to cancel (Civil Code Sections 1689.5-1689.14), and the CSLB complaint and dispute resolution process. You can also file complaints with the CSLB, which has the authority to investigate and discipline contractors.

Should I hire a lawyer to review contractor bids?

For projects over $200,000, having an attorney review the contract (not just the bid) before signing is a wise investment. An experienced construction attorney can identify problematic clauses, ensure proper protections are in place, and advise you on your rights and responsibilities. The cost of a contract review (typically $500 to $1,500) is minimal compared to the potential cost of a construction dispute.

Concerned about a bid you have received? Our team can help you evaluate contractor proposals and identify potential issues before you commit.

Frequently Asked Questions About Identifying Bad ADU Bids

What is the biggest red flag in an ADU contractor bid?

The single biggest red flag is a bid that lacks a detailed scope of work. If a contractor provides a lump-sum price without breaking down what is included, you have no way to verify what you are paying for or compare the bid against other proposals. A professional ADU bid should itemize every major phase of construction, specify materials by brand and grade, include a timeline with milestones, and clearly state what is excluded. Vague bids give contractors room to claim that essential items were "not included" and charge you extra through change orders later. Always insist on a detailed line-item breakdown before considering any bid seriously. For help evaluating bids, see our guide on how to read and compare ADU construction bids.

Should I be concerned if an ADU bid is significantly lower than others?

Yes. A bid that comes in 20 percent or more below competing bids is a major warning sign. While it is tempting to choose the cheapest option, abnormally low bids usually indicate one or more problems. The contractor may have underestimated the scope of work and will rely on change orders to make up the difference. They may plan to use substandard materials or cut corners on workmanship. They may be inexperienced with ADU projects and not understand the full requirements. Or they may be desperate for work due to financial problems, which increases the risk of abandonment mid-project. Compare the low bid's scope and material specifications against the other proposals to identify what might be missing.

How can I verify that an ADU contractor's bid is realistic for my area?

Start by researching average ADU construction costs per square foot in your California city. As of 2026, most ADU projects in Southern California range from $250 to $450 per square foot depending on the size, design complexity, and finish level. Northern California costs are similar, with the Bay Area trending toward the higher end. Compare each bid's total cost against these benchmarks for your project size. If a bid falls significantly outside the expected range in either direction, ask the contractor to explain their pricing. You can also ask each contractor for references from recent ADU projects of similar size and scope and ask those homeowners what they paid. Check our article on how many ADU bids to get before choosing a contractor for more tips on the bidding process.