Contingency and carry reserve are two different buckets, and mixing them is why the 10 percent felt fine on cosmetic work. Contingency covers unforeseen physical conditions, meaning things behind finishes you couldn't see. Carry reserve covers extra months of interest, taxes, insurance and utilities if the job runs long. A gut generates both at once, because the discovery that costs money also costs weeks.
What shows up on a gut and not on a cosmetic job is everything that only becomes visible after demo. Failed sill plates or joist ends under a bathroom, knob and tube or cloth wiring that turns a partial rewire into a whole-house rewire, a cast iron waste stack that cracks when it's disturbed, a sewer lateral with root intrusion, undersized service that forces a panel and meter upgrade, plaster keyed to lath that comes down in whole rooms, and framing that isn't plumb enough to hang new cabinets against. Any two of those on a 100k budget is your 20k.
The other reason the percentage climbs is that a gut has more line items, so more of them can be wrong. On a 100k scope, being 15 percent light on four trades is 20k with nothing unexpected happening at all.
One mechanical detail to plan around: lenders size the rehab holdback off the approved budget, and contingency generally isn't funded, so it has to be your own cash sitting available. And the moment you spend contingency in week two rather than week eight, treat that as a signal to reprice the remaining scope instead of assuming the rest holds.
