Editor's Note: CSI is pleased to publish this blog from Ken Lambert, current CSI Chapter President in New Hampshire. If you have an idea or opinion you would like to share with your colleagues in the construction industry, please contact CSI Content Strategist Peter Kray at Pkray@csinet.org. He would love to help publish your thoughts.
Product warranties, as well as builder/ general contractor warranties, are an important part of the construction and building product industries. Clients and designers often ask about them, and product representatives need to know their own warranties, and possibly that of their competitors. But just how important is any warranty? Does it provide a real value, or is it really more of a money-maker or marketing ploy?
Several years ago, I ran the warranty (and punch-list) program for a mid-size developer/builder, and along the way I ended up altering our “Builder 1 Year Warranty” quite a bit. The following are some takeaways from behind the scenes:
The default goal of most warranties (as well as insurance policies) is to NOT pay out any considerable claim or monies.
Any rework or other dollars that a builder or a manufacturer has to pay out due to warranty goes directly against its bottom line, and is often not fully allocated. This is why the fine print typically states that the full obligation of the product maker is, at its discretion, replacement of the subject product with another like product OR reimbursement of the price paid for the product. That’s it; no labor costs, etc.
This garbage disposal will not turn into a hippopotamus.
I’ve often said this after reading and analyzing hundreds of product warranties in my career. If you read any warranty, you’ll quickly notice that 90 percent of the written warranty is what the warranty will NOT cover. At the end of the day, many written warranties are barely worth the paper (or PDF) they are printed on.
Product warranties are a necessary marketing tactic.
In a competitive landscape, manufacturers need whatever angle they can get to stick out from the rest. A 20-year limited warranty is twice as good as a 10-year limited warranty, in theory. But one must also consider how some manufacturers mandate “pro-rating” in their warranties, which minimizes the true value of the warranty.
Warranty wording can sometimes be a scare tactic.
When I worked for the developer, I had the added task of altering our 1-year warranty to better protect our company. I knew firsthand if we had a chronic construction or product problem that was costing us a lot of money, so I would change the new/pending warranties that we would offer to exclude that very specific issue.
However, there are two ways that this did not work that well for us.
Every state, as far as I know, mandates that a builder must offer the buyer a one year warranty, and also that the new home/ building must provide a reasonable level of habitability and serviceability. So even if someone put in their home warranty that the roof will not actually keep rain out, that clause would be against the law.
The second way is that, like other aspects of life, the person/customer that yells the loudest and/or the most often typically will get the outcome they are seeking. Even if, by the letter of the warranty, the company is correct and the consumer is wrong, a direct, forceful, and vocal consumer can often force the hand of the company. Especially with the help of a stern letter from a lawyer.
Extended warranties are, almost always, a bad “upgrade” for the consumer.
All of us have faced the question of whether we should buy the extended product warranty at Best Buy, The Home Depot, etc. There is plenty of evidence out there that these policies, while huge profit makers for the retailer, will have very little benefit for the consumer.
To summarize, warranties must be reviewed closely to determine what they actually cover. In nearly all cases they strongly benefit and side with the manufacturer, and should not be depended on to provide a high degree of consumer protection.
Ken Lambert is the current CSI Chapter President in New Hampshire, and has worked throughout New England and the East Coast in construction for many years. He has worked as a construction and real estate consultant for Maven and GLG, and his writings have been featured in ARCHITECT magazine, www.constructiondive.com, and SMPS-Boston (Society of Marketing Professional Services). He can be reached at klambert@red-thread.com.