You can never quite fully explain the potential damage that may be found under water damaged siding. You can make notes in the estimate that the damages may extend beyond what can be seen. An experienced contractor can describe what might be discovered once things get opened up. You can even tell the client that you are pretty sure that the damage will be extensive, but they always sound surprised to see what things look like when the walls are opened up.
If you are talking to a contractor that is pretty sure that the damages are likely to extend into the structural framing - believe him. It is likely just to let you know in advance that you do have a problem and it can be fixed. It is not the frighten you and to get a change order out of you.
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