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Building buyer confidence.

Thanks to ABC News reports and Capitol Hill hearings, Florida subdivision Seville Place has become an infamous example of what FHA and Home Owners Warranty - which respectively inspected and warranted the development - don't necessarily guarantee: roofs that won't decay, living rooms that won't flood, and so on. HOW insists the problems fell outside the scope of its coverage; nevertheless, the builder and HOW ultimately agreed to a $1.7-million settlement. But not before generating publicity that has compromised the confidence that home warranties once instilled in the market.

We're not trying to pick on the home warranty companies in our analysis of their predicament (see page 141). We assume that the companies are well managed, well meaning, and stable. But the issue of confidence, of trust, is probably the number-one concern among home buyers today, and now that the limits of home warranty coverage are better understood, the policies no longer inspire the same peace of mind. So while home warranties may be succeeding as narrowly targeted insurance products, they're clearly losing ground as confidence-building marketing tools. Which raises big questions about the next move for that industry, since warranty companies historically have had better luck promoting their products to builders as a way to sell homes than as a prudent, risk-limiting instrument.

In any case, many in the building industry are now considering other ways to certify reliability or guarantee a promise to buyers to "be there" if needed. This is especially difficult to do in an industry of so many small businesses, where few companies can count on great name recognition or obvious financial strength to win trust. During the Builders' Show in Las Vegas, just-inaugurated NAHB president Jay Buchert suggested that local HBAs set up their own systems for ferreting out the few bad apples. The HBAs, he says, should write boilerplate "contracts" between builders and buyers guaranteeing a minimum, locally determined, level of quality and customer service. A builder grievance committee would investigate violations and, when builders fail to fix the problem at their own expense, expel offenders from the HBA.

The threat of losing the prestige of membership - let alone access to HBA programs and services - has apparently worked well in Buchert's hometown of Cincinnati. The local courts there routinely refer cases to the HBA grievance committee before putting them on their own dockets.

NAHB plans to explore this idea with HBAs. We're concerned that due process be ensured, but otherwise strongly encourage HBAs to consider Buchert's plan. It's a good way to win back some buyer confidence, and perhaps keep at bay the perils and costs of publicly imposed solutions like state licensing.

On another subject, a new monthly feature premieres in this issue of BUILDER, and we hope you'll notice it and then write complimentary letters.

Called "BestSellers," the feature adds a news dimension to our Selling section, with late-breaking reports of projects (of all types) selling faster than their competitors. The homes presented here will be chosen by the numbers alone, unlike those in our Design section, where, though sales success is important, we acknowledge a tendency to show more daring projects that might spark readers' imaginations. As always, we encourage readers to submit their projects for publication in either section. Just send pictures, plans, sales materials, and key facts; we'll follow up with questions as necessary.
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Title Annotation:Editor's Notes
Author:Rouda, Mitchell B.
Article Type:Editorial
Date:Mar 1, 1992
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