Richport Properties, an Atlanta-based builder and developer, recently was recognized by its warranty provider, 2-10 Home Buyers Warranty, for its success at resolving homeowner warranty complaints and for having gone more than two decades without a major structural claim or the need to enter into outside arbitration.
To say that Richport's track record is unique would be an understatement. It is only one of four builders nationwide to which 2-10 has bestowed its "Platinum" award, out of the 12,000 builders it represents. And while many builders insist that houses today are built better than ever, the fact remains that warranty disputes continue to plague the housing and insurance industries. Those complaints are always in danger of going nuclear when builders and warranty providers don't educate homeowners about how their homes "work" and what's actually covered.
That homeowners aren't always satisfied with the way their warranty complaints are handled is evidenced by the fact that home warranty companies finished a dubious first on Angie's List's "2008 Most Complained List" for the fourth consecutive year. More than half of the reports that Angie's List received last year about home warranty companies got "D" and "F" grades from consumers. "Most of the complaints stemmed from misunderstandings over what the warranty covered, poor customer service, or unhappiness with the contractor sent out to diagnose or fix the problem," recounts Angie Hicks, the list's founder.
(It might be a coincidence, but builders ranked second on last year's "Most Complained List.")
In addition, some states are taking a dimmer view of how homeowners are being treated in these disputes. For instance, Minnesota's legislature is considering two bills that, if passed, would make it easier for owners to pursue warranty claims against builders. On its Web site, Finance and Commerce magazine reports that one bill would eliminate a requirement for homeowners to notify the builder in writing after discovering a defect. The other bill would give owners more time to notify the builder or remodeler.
It might be instructive, then, to take a closer look at what Richport Properties is doing right and how its procedures for handling warranty complaints succeed mainly through consistent execution.
Richport, at least ostensibly, seems like any other midsized builder: Last year, it started 100 homes in seven communities that ranged from 1,600 to 2,500 square feet and are priced from the $120s to the $500s. The warranty coverage it offers through 2-10 is pretty standard, too: one year for construction, two years for mechanicals, and 10 years for the house's structure.
But the 33-year-old Richport continues to build upon its reputation as a quality builder. On top of receiving 2-10's Platinum Award, Richport was recognized last year by several local trade and business groups for its neighborhood designs and customer service.
Rich Porter, this builder's president and owner, doesn't think his company is a better builder than its competitors. "But we have developed better processes." Porter says he is committed to managing customers' expectations through a "methodical orientation process to bring customers into a complex product and help them make that transition [in terms of] what to expect from the place they would call home."
Richport, he says, has always had an orientation manager on staff (a job he did himself for many years), who is there to inject "objectivity" into a process he says is all too often "elusive and subjective." He credits companies like 2-10 for establishing warranty standards, which he incorporated into a buyer's guidebook that Richport put together, called "The Incredible Journey." Porter was instrumental in helping the Greater Atlanta HBA develop a homeowner's handbook, which Richport distributes to every buyer.
The company has four contractors on staff and addresses any warranty complaint within 48 hours of receiving it, says Renee Stump, Richport's warranty director. Each contractor is "intensely cross trained" in sales and customer service so he knows how to interact with homeowners, some of whom might not be in a great mood. And in the three years she's been with the company, Stump can only recall two times when Richport had to get a manufacturer involved in resolving a warranty dispute.
However, not all warranty complaints are equal, and warranty management often boils down to homeowner education. "I'll get calls from owners saying they don't have any water pressure," says Stump. "Sometimes it's lack of knowledge about how a house works." Santiago adds that many of Richport's customers are first-time buyers and former renters who "are used to calling the manager of the apartment complex when something goes wrong." (The builder provides all new owners with maintenance products like touch-up paint, spackling, and a plunger. "Who thinks of buying that when they move in?" asks Cathy Santiago, Richport's marketing manager.)
Tom Acree, 2-10's regional sales manager, says that many warranty complaints are about "the small things," like nail pops, so customer education about what to expect can help keep warranty complaints from turning into major battles.
Acree says that there are a number of things builders should be doing to minimize warranty claims. One is to fix all punchouts before an owner moves into the house. Another is to set up a "come back" schedule somewhere within 30 to 90 days of the closing to fix anything the customer might have noticed after moving in. "You need to make them aware of what's covered and what isn't, and you need to be punctual when you set appointments or else the customer is going to take it personally." (Susan Scurry, a 2-10 spokeswoman, estimates that about 5% of the warranty complaints her company fields end up in arbitration.)
Acree observes that builders are pushing warranty coverage harder these days "because of the protection it gives them in binding arbitration cases." Warranty coverage is optional in most states. Acree says that only New Jersey requires builders to provide mandatory warranty coverage for new homes; Maryland requires builders to disclose to buyers that warranty coverage is available. Stump says all of Richport's customers accept coverage, the first two years of which the builder pays for. Porter believes that because warranty coverage in his state is optional, his company has had the latitude to develop a warranty program with 2-10 "that's meaningful to our customers."
Acree also contends that more homeowners are asking for warranty coverage at a time when builders are going out of business in droves. "They want protection for the latent structural stuff" that, he explains, might not show up until years after a failed builder is gone.
Porter made the point that Richport doesn't get wrapped up in the fine print of a warranty contract when something legitimately goes wrong with the house that's attributable to a construction or product defect. Santiago notes that this builder regularly goes "over and above" its warranty obligations when, for example, it is willing to fix something beyond the timeframe of the coverage. A recent complaint about a showerhead that was spraying water all over the owner's bathroom walls required repeated repairs until Richport's contractors finally discovered a hairline fracture in the plumbing.
Porter adds that his company has replaced wood floors because it determined that there was too much moisture in the slab, "even though nothing in the warranty agreement says we needed to do that. But it was the right thing to do."
John Caulfield is senior editor at BUILDER magazine.
