(LRT THINK TANK) INSIGHTS ON ATTAINABILITY + PRODUCT: WARRANTIES

5 minute read

In November 2019, we hosted 120 or so key stakeholders in the housing industry for a deep dive event focused on driving attainability for middle income households – those who make roughly $50K-$125K per year.

In table-based think tanks of six to eight people, we addressed 15 questions related to PLACE, PRODUCT and PRODUCTION (or process) — the three big buckets that need to be tackled to make homes more attainable without sacrificing the quality of our homes and our lives.

Here’s a question from the PRODUCT segment of our agenda.

How can we create a great experience beyond the signed contract, BY better managing expectations, lowerING warranty claims and making it safer for builders and developers to build less cushion into the sales price to cover warranty expense?

We asked 14 thought leaders, including housing developers and regional builders; experts in quality management and lean building, marketing and off-site construction; manufacturers; academics and a technology provider.

Here’s what they had to say:

1: Reduce warranties by improving quality.

Are there ways to identify the biggest pain points in the construction process? Take drywall. Could you replace it? Innovative new materials to replace something like drywall could bring costs down and improve quality.

2: Can the warranty amount change affordability?

For the single-family home builder, the accrual to cover warranty on every new home is about 1.5%. That’s probably not enough for a single-family home builder to reach an attainable product. Is there something you could do to marry off-site, higher density for multifamily or for hospitality where this might make sense? Maybe, but 1.5% just isn’t a big enough bogey to really change the affordability of the product. On a $300,000 home, that’s a little over three grand.

3: Set expectations with the buyer.

Quality’s in the eye of the beholder. Make sure of your buyers’ expectations from the start with the sales counselor all the way through to the warranty rep or customer service rep. Counsel buyers on the most common things that could happen so they’re not upset 60 days in when some nail pops come up. But keep in mind different buyers have different expectations. And when it comes to reps, career reps with more experience who enjoy the job and do it well have learned how to adapt to different buyers and different temperaments. They can set the expectations and manage them.

4: Who owns the issues?

The more handoffs, the more finger-pointing and the harder it is to track down who owns a problem. That confuses and upsets buyers. The more you can consolidate a process with a single-source supplier and have somebody own any issues —like having a window supplier set their product as opposed to your framer doing it —the more likely a buyer will see it all as a seamless process.

5: Buy back your homes.

This might be a lead in to how you control your warranty: buy one of the homes you built and sold 10 years ago. Then send in a crew to take it apart and examine it.

6: Have a prevention mentality.

With customers, even spec buyers, do pre drywall walks and pre-construction meetings. Walk them through a house like the one they’re buying. The warranty load will be lower regardless of the number of items on a final walk because of the relationship you’ve established. With trades, after you frame the house and have your mechanicals in, walk that house with foundation, framing and your mechanicals before they drive away. That is so basic, and it will save everybody money and time and will reduce your warranty load.

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