By Ken Ward
So How Could a Warranty Help Me?
This question was posed to me while sponsoring an NAHB event earlier this year by a woman who introduced herself as the wife of a home builder. During our conversation, I learned she wears many hats in her family-run company and holds a position in her local HBA.
That day she was wearing her Risk Manager hat. Her question was asked from the right perspective, not “Would the warranty pay?” but rather “How would the warranty help?” She recounted an issue they had experienced with a homeowner earlier in the spring. The homeowner had traveled overseas for the winter, leaving the house locked and unattended. Snow accumulated on the back deck against the double doors of the home. By the time the homeowner returned, the snow had melted and water had entered the home through the deck doors. Because no one was there to find it and clean it up, the flooring incurred water damage.
Somehow this homeowner managed to make a claim against the builders General Liability insurance and received a pay out of approximately twelve thousand dollars. The builder felt he could have remedied the problem for about three thousand and avoided a claim on their insurance had the homeowner given him the chance. The builder did not agree that he was totally at fault considering the absenteeism of the homeowner. After explaining the circumstances, the builder’s wife again posed the question, “How could a warranty help me?”
I mentioned earlier that the question was posed from the right perspective. You see, the perspective of “would the warranty pay?” means that you have reached the conclusion that this builder was totally responsible for the damage and therefore the only question left was who would foot the bill? This is an inaccurate but understandable builder mindset. Builders are always expected to pay regardless of what has happened. In order to achieve a different result, builders must be willing to think about warranty differently, not just as a vehicle that will pay on their behalf. Although that is often the result, think of warranty as how you will interact with your homeowner after the closing.
This is accomplished through providing an expressed written warranty. Your warranty should set definitive standards to measure how your work is performed. It should set guidelines for making claims and handling disputes. Your warranty should contain the exclusions that, to you, may be common sense. If you have never identified these exclusions in writing, you cannot and should not assume that a homeowner understands or agrees. Your written warranty should be easily understandable and accessible to your prospective homebuyers. You are probably thinking that buyers seldom ask about the warranty. If they don’t ask to read it or even inquire about what they will receive, how effective can an expressed warranty be?
In order for your expressed written warranty to be effective, you must lay the foundation from the moment a prospective buyer comes in contact with your company. Begin setting expectations by providing marketing materials, directing them to your website as well as the website for your
third-party warranty provider. Train your sales staff to stress the importance of your warranty. If you don’t make it important, your buyers won’t view it as being important until something happens. Then they will draft their own ideas and standards about what is covered and what you, the builder, are going to do about it.
An effective warranty program will also contain homeowner maintenance information. Empowering and educating your homeowners on their maintenance obligations can be very beneficial by reducing callbacks.
So back to the question of “How would the warranty help me?” A properly administered warranty program will help a builder effectively educate their homeowners on warranty (what is expected of the builder) and maintenance (what is expected of the homeowner). A properly educated homeowner would have understood that they cannot leave their house unattended for months. They would also have understood that their first point of contact concerning defects in materials and workmanship should always be their builder.
Using a written warranty program is not a guarantee that your homeowners will behave the way you would like them to behave; however, not setting expectations is guaranteed to create the opportunity for misunderstandings and disagreement.Share