Upon moving into a new house, the first things many buyers do is plan how to fix it up or customize it to their needs and desires. Perhaps, for example, you'll want to finish the basement, remodel the kitchen, or take out a wall to make a bigger family room. Of course, there are many choices and variables involved in any such project, like the extent of the work, the best materials and finishes within your budget, and so on.
When you hire a contractor, you can expect an "estimate" of the total cost. But that's simply the contractor's best professional assessment, including the cost of hiring any subcontractors, the price of materials, and any other labor involved. What happens if after the work is done, the total bill is far beyond what you expected, and you see indications that the contractor didn't follow some of your instructions?
Getting an estimate from a contractor is different from getting a quote. A quote is an offer to enter into a contract. It should be the exact amount that a particular task will cost, without much "wiggle room." Ideally, both quotes and estimates should be put into writing, although some contractors will intentionally avoid doing so.
Unfortunately, if you do not receive a precise quote, but only an estimate, you cannot really hold the contractor to the amount initially suggested. Moreover, if your contractor did not put anything on paper, even proving that the estimate was a certain amount could become your word against his.
None of the above necessarily means that you should write your contractor an check for an amount that seems inappropriate. Estimates, generally, must be professionally reasonable. A 10-20% overage might be considered reasonable, especially if the contractor discovered issues along the way that he couldn't have been aware of initially (for example, mold or past flooding).
A contractor who does discover problems in the course of work would normally notify the homeowner and explain the possible budgetary ramifications. A change order, explaining the costs and changes involved, should be agreed upon.
But without a formal change order, a contractor should not spend money on, say, nicer flooring and lighting than what you discussed.
To follow up, begin with a non-hostile phone conversation. Ask the contractor to explain why the price rose so dramatically from the initial estimate. He will likely say something about unexpectedly high expensive labor and materials.
Request an itemized invoice, explaining that you do not feel comfortable remitting any payment until you can further examine this issue. This invoice should include a list of many suppliers, subcontractors, or workers on the project, and a listing of all materials purchased.
Examine that invoice closely for areas where you believe your contractor spent more than was discussed. Next, if appropriate, draft a brief letter, or hire an attorney to draft a brief letter, explaining why you feel that you should not have to pay for these materials and the associated labor. Explain that you made clear that you were looking for basic work, nothing ornate, and that this was clearly communicated from the outset. You might offer to pay the amount of the original estimate immediately.
Your contractor might object, and demand something closer higher. After all, the contractor might have subcontractors or suppliers who are pestering for payment, so in this sense, you have leverage to withhold it. Continue negotiating until you arrive at a fair number in the middle.
Keep in mind, a home contractor might become frustrated and file a lien. A lien is essentially a cloud on title, filed with the county clerk, by a contractor who did work on a piece of property. This can be an impediment if you're looking to sell your home.
Your contractor could also file a lawsuit. This would allege that you breached your contract to pay for the fair and reasonable value of the goods and services. Should your contractor sue you for your nonpayment, you would certainly have defenses to the claims, given the lack of notice of the increased costs and intentional overspending. It is unlikely, however, that your contractor would sue you for a relatively small sum of money, such as a few thousand dollars; the cost of the lawsuit alone would make it more advantageous for the contractor to attempt to negotiate with you and collect as much money as quickly as possible.