Should Contractors offer Express Warranties?
About five or six years ago, and after more than 20 years in business, S&R Remodeling of Madison, Wisconsin began offering written three-year warranty on all craftsmanship.
That’s three times longer than Wisconsin law requires or what most of the company’s competitors offer, according to S&R Remodeling Owner Scott Nyland.
“I believe it’s the best advertising,” Nyland said of his express warranty. “People hear that and think it’s above the call of duty, but it’s really not. As a contractor, I take pride in my work and stand behind it like I would want anyone else to do for me. It’s in our contract and on the site, but I don’t make a big deal out of it.”
The truth is, many successful contractors in the building trades think the same way. They will fix problems long after they are required to by state law because they take pride in their work and understand the value of protecting their reputation, customer referrals and repeat business. What makes Nyland different from most of his competitors is his willingness to express his commitment to making things right in writing.
While some contractors consider such “express warranties” an unnecessary risk, others find them to be a very cost-effective way to grow their business.
Implied vs. express warranties
To explain why, it helps to review the two basic types of warranties home builders, remodelers, roofers and other home services contractors offer in the United States.
“Express warranties” are issued by the manufacturer or seller of a product. In the homebuilding and remodeling industry, they are typically offered by the general contractor, exceed the minimum requirements set by the law and are expressed in writing.
“Implied warranties,” by contrast, are set primarily by state laws and courts, which generally require contractors warranty their craftsmanship and the habitability of any structure they build. Beyond that, state warranty requirements vary. Several states specify only that the builder warranty their work for “a reasonable period of time,” while others stipulate they do so for a specific number of years. Forty-six states have a statute of repose that limits how long a property owner has to sue a builder over a claim involving their work. In addition, more than 30 states have enacted “right to repair” laws that require homeowners give contractors a certain period of time to repair a problem before suing them in court.
The fragmented nature of regulation can make it difficult for homeowners and builders to know what their rights and obligations are should a dispute arise.
“In many cases, the only guidance in determining the scope and protection offered by an implied warranty is prior case law, where the court has determined what is covered rather than the parties to the contract,” notes 2-10 Homebuyers Warranty, which markets warranty programs to both homeowners and builders. “An express warranty eliminates such ambiguity.”
A powerful sales and marketing tool
While they are contracts and should be drafted and reviewed regularly by competent legal counsel, express warranties can also provide contractors with a very cost-effective way to:
- Attract new customers.
- Convert more leads into sales.
- Manage customer expectations.
- Generate repeat sales.
S&R Remodeling, for instance, uses the Remodeling Warranties page on its website to explain why homeowners should let the company buy materials and appliances needed for their projects.
“To cut costs, some customers purchase their own materials, and don’t realize that this leaves them with no warranty,” the page explains. “If the product fails and the contractor has to fix it or even replace it, the labor costs can easily exceed the initial cost of the product. Even if a product has a warranty, it typically doesn’t cover the cost to re-install it. That is why S&R suggests that you buy your materials through your contractor. If anything does fail in the warranty period, you are completely covered.”
Many roofing and HVAC contractors and some new homebuilders use free biannual checkups offered under their extended warranties to generate add-on sales. This is one reason why contractors will set aside a portion of their advertising budget to pay for warranty work. If no claims arise during the year, they roll the funds over or distribute them as profits.
Nyland does neither.
“It comes out of my pocket,” he says. “Our work should hold up or it’s on me. But, to be totally honest, we don’t get very many call backs, so it’s not a great expense.”