Dallas-based Centex Homes announced it would double its “fit and finish” warranty from one year to two years, effective on all homes it sells beginning immediately at the start of April. Centex is not the first to offer a two-year warranty. Since 1994, Atlanta's Morrison Homes has offered a similar two-year warranty on all its homes. But Centex's move may prompt other builders to think twice about the one-year warranty on materials and general workmanship, long considered the industry standard. This warranty is in addition to the standard 10-year structural warranty.
Centex said Western Pacific Mutual Insurance Co. will continue to cover the first year of the warranty (except in California, where Centex warrants its homes); the extended portion is being covered by Centex Homes. The newly extended warranty covers materials and workmanship and will transfer to any owner who purchases the home during the warranty's effective dates.
The extended warranty makes economic sense, claims Morrison Homes president Stewart Cline. Inspired by the automobile industry's warranty extensions, Cline recalls there were concerns at first about additional burdens on the customer care department, and some contractors raised their fees. But the warranty more than paid off in marketing and in customer satisfaction, he said. A study of Morrison home buyers five years ago indicated that buyers valued the two-year warranty at anywhere from $500 to $2,000. Morrison sends a letter to the buyer 11 or 12 months after closing and then again at 22 months offering to do a walk-through. “Some customers waive the service,” notes Cline, so the extra warranty costs the builder nothing beyond the cost of the postage stamps. “Most manufacturers would expect their products to perform for two years. My feeling was that you take care of the calls anyway, so let's do it on our schedule rather than wait for a complaint. There's no real added expense,” said Cline.
The gold standard for warranties, notes Cline, is Atlanta's John Wieland Homes and Neighborhoods, which warrants some items, such as roofs and appliances, from 5 to 20 years as of all contracts written in July 2000. It boasts on its Web site of the most comprehensive warranties in the industry. “I applaud Centex's move, and John Wieland, too,” says Cline. “I think J.D. Power raised the bar with the level of customer service and satisfaction. We're all responding to that, which is good news for the customer.”