Buyer Beware

 

Wise customers should always be aware of the hidden costs that come with the items they purchase.  This business is no different in that respect.  The word “FREE” gets thrown around a little too “freely” (excuse the pun) nowadays.  And cheap isn’t always cheap either.

 

Here are some of those freebies you need to think about.

 

FREE FURNACE with the purchase of a new A/C system.

 

These offers typically only apply to top-of-the-line A/C systems, that are quite expensive.  And if you shop around, you’ll find that you can usually get a comparable A/C and furnace system for the same price or less.  This is an offshoot of the old “buy one get one free” gimmick after they’ve doubled the price of the one you’re paying for.

 

 

“CHEAP” REPLACEMENT BIDS

 

Everybody loves a great deal.  But as we know, some things are just too good to be true.  We suspect that something’s wrong, but we just don’t know what it is.  In our business, there’s a lot of room for that to happen.  I see bad installs every day, and it just drives me nuts.  People often go for several years without knowing how bad these installs are.  And when they find out, they are either furious or in disbelief.

 

I wish the buyers would understand that the A/C system is NOT an appliance that merely needs to be plugged in.  And neither is the furnace.  There is an extremely complex process involved in selecting the proper equipment size, and ensuring that the system has the proper amount of ductwork and that the required flue system for the furnace is connected to that furnace.

 

A good install must include 3 things:

 

  1. It must meet local codes
  2. It must be installed per the manufacturer’s instructions or the warranty will be voided
  3. The work must not be done in a slipshod manner

 

What are the consequences of these installs?

 

There isn’t enough room in here to list the number of problems you can have if a system is improperly selected and/or installed.  The furnace has the ability to make you sicker than a dog or worse if it isn’t vented properly.  And if the gas line isn’t safely run, you can have an explosion. 

 

The unseen costs are in the form of:

 

  1. Higher energy usage
  2. Higher repair bills
  3. Shorter system longevity
  4. You get busted for code violations by the buyer’s mechanical inspector when you go to sell the house.

 

So when you’re shopping for a system, your biggest concern should be in getting the best install.  There really isn’t that much difference in the brands nowadays, because many of them share a lot of the same components.  The BIG differences are in the quality of the installs. 

 

OVERPRICED BOX HEATERS ($300 - $500)

 

I’ve run into these with increasing frequency at customers homes lately.  It’s basically a heater inside box on wheels.  Many of them also have built in fans.  Yes, they do produce heat.  That isn’t the issue.  The issue is the cost of the inefficient method of producing each BTU of heat they produce (compared to natural gas) and the blatantly misleading advertising claims, and the incredibly high cost of these units.  These units are merely a box containing a 1500 watt electric resistance heater or infra-red bulbs.  The ads state that this unit will “heat a 1000 SF” area.  And that it will do this for like $1 per day or less. 

 

There’s no magic involved in this.  First off, wattage is a measure of how much electrical power an appliance uses.  It isn’t a measure of the volume of heat it produces.  Heat output is measured in BTU.  But electric resistance heat wattage is directly convertible to BTU by multiplying it by 3.41.  So a 1500 watt resistance heater will deliver only 1500 times 3.41 = 5115 BTU of heat.  That isn’t nearly enough heat to keep a 1000 square foot area in a house at 70 degrees by itself in our climate.  The furnace in an average 1000 square foot home in this area has an output of at least 10 times that many BTU, because it takes that much heat to maintain 70 degrees in your house on a cold winter day.  So people buying these box heaters thinking that they’re going to save a bundle of money on their gas heating bills are in for a big shock when they bring them home.  And lots of them are becoming angry about this when they immediately discover that the units by themselves don’t live up to the 1000 square foot claims, and then they get the electric bill and really flip out.

 

And to make matters worse, the cost of operating a 1500 watt (5115 BTU) electric heater is about 3 times as much per hour as the cost of running a 5115 BTU natural gas heater in our area. 

 

The cost of electricity in our area is about 8 cents per KWH (thousand watts per hour).  So a 1500 watt heater will use about 1.5 KWH (1.5 thousand watts per hour), which is about 12 cents per hour.  All electric resistance heaters have thermostats built into them to turn them off at a certain temperature.  But the colder the area is, the longer they run before they turn off.  But if they are unable to keep the temperature in the area from dropping (because the unit is undersized for the required amount of heat needed to heat that area) they will run 24/7.  So in that case, the cost of operating your little $500 box shows up on your monthly electric bill as 24 x 30 x .12 = $86.40 even though your little 1000 square foot house got nowhere near 70 degrees.

If you wanted to keep the entire house at 70 degrees during a cold month, you’d have to buy up to 10 of those heaters, and the monthly electric bill could reach as high as $864.00. 

 

In our climate, these units have only one practical usage, i.e. to supplement the heat in one area of a house that is being heated by another means, like a natural gas furnace.  The smaller that area you’re supplementing the heat in is, the less these units will cost you to operate.  We’ve already seen the worst case scenario with what occurs when the unit never shuts off.  So the ideal use for these would be if you placed it in one area that is merely a bit cooler (and a lot smaller) than the rest of the house. 

 

There’s only one case I can think of where these units might be of value in our area.  Let’s say that you have one (preferably smaller) area of the house that is always cooler than the rest of the house.  And there’s no way to correct that scenario cheaply.  For example, let’s say that one part of the house was added on after the house was built, and the addition was built on a slab of concrete, so there’s no basement under it to run the required ductwork to properly heat that area using the gas furnace.  In this case, the electric heater might not have to stay on very long to bring the temperature of that area up to the same temperature as the rest of the house, i.e. 70 degrees.  And let’s say that you are currently keeping the thermostat that controls the gas furnace at a higher (than 70 degree) temperature to maintain 70 degrees in that cooler area.  You’re using more natural gas to keep the rest of the house at a higher temperature.  And if the rest of the house is a lot bigger than that cooler area, it could save you money to leave the gas furnace thermostat set at 70 degrees and merely supplement the smaller cooler area with electric resistance heat, even though the cost per BTU of electric heat is 3 times more than the cost of natural gas heat.  But this scenario would only save you energy money if you were currently keeping the gas furnace thermostat at a higher temperature to bring the cooler area up to 70 degrees and that cooler area is much smaller than the rest of the house and requires a lot less than 5115 BTU to heat – and there’s no cheaper way to run the required ductwork to that area to properly heat it with the gas furnace. 

 

So let’s say that your scenario does in fact match this one.  You can go to the store and buy a 1500 watt space heater that will deliver the same amount of heat (about 5115 BTU), and consume the same amount of power (1500 watts) for $30-$40. 

It might not look as nice as the box, and it probably won’t have wheels.  So you must decide how much you value those niceties.  I personally wouldn’t own either one of them.  If someone offered me either one for free, I would graciously decline their offer and find another way to solve the problem – one that would allow me to use a more efficient means of either providing more heat to the cooler area, or the very best solution of decreasing the amount of heat loss from that area.  And that’s because no matter what form of energy you use to heat it, it still costs more money to use more of it.  I’d rather spend my money on things other than energy, like really cool toys for measuring heat loss!

 

HOME BUYER WARRANTY

 

I know people who’ve saved a lot of money with these warranty contracts.  But I also have seen the flip side of the coin, having previously been a home warranty contractor earlier in my career.  Generally, as it pertains to heating and air conditioning systems, most people’s expectations are a bit over the top regarding the value of these contracts for numerous reasons.  Most folks don’t read these contracts at all.  They just assume that they are covered if anything HVAC related malfunctions during the term of the contract, as long as they pay their co-deductible amount.  Read the exclusions in the contract before making any decisions.  And unfortunately these are subject to interpretation by the warranty company and their contractors.  I’ve seen numerous contracts where it was clearly spelled out that anything caused by a “lack of maintenance” was excluded.  If you don’t change the air filter in a timely manner, it could destroy your system, and you might not therefore be covered.  Rust is another exclusion.  If the heat exchanger rots out in the furnace and you need a new furnace, you might not be covered.  If the contract excludes digital thermostats, you won’t be covered for a thermostat issue. 

Some warranty contracts have exclusions that aren’t even stated in the policy, like whether or not you’re covered for a refrigerant (Freon) leak in the cooling system.  I know of one company whose position was that the leak had to be worse that 3 pounds of refrigerant per year, or it was merely considered a routine maintenance issue, not covered by the contract, even though this wasn’t stated anywhere in the contract.

 

So anything the warranty company defines as “routine maintenance” will typically not be covered.  And these “routine maintenance” exclusion issues are rarely spelled out in the contract wording. 

 

And if the contractor arrives and it turns out to be a “routine maintenance issue” or any other excluded issue (whether stated in the contract or not), you are responsible for paying the contractor for that service call, whether he fixes the problem or not.  If you chose not to pay the contractor, he can go after you for the money, and the home warranty company can refuse to send out another contractor.

 

The other issue is with the timeliness of the occurrence of the problem.  Some companies won’t cover any “pre-existing” conditions.  And typically no representative of the warranty company does a pre-warranty inspection.  The contractor or the warranty company will often decide whether or not the problem existed before the policy was taken out.  And this is almost never stated in the contract.  No consideration is given as to whether or not the homeowner had a mechanical inspection performed on the system before buying the home and the warranty contract.

 

Also, I know of no warranty companies that will pay to have an improperly installed furnace or A/C issue corrected.

 

The bottom line is that it’s up to the warranty company to determine what’s covered and to what extent.  It isn’t the homeowner’s or even the contractor’s decision.  Warranty companies often get second opinions from other warranty contractors in the area as well for a number of reasons.  And some warranty contracts contain a specific dollar amount limitation per year for the heating & A/C system, i.e. $500.  But those dollar limitations are typically stated in the contract.

Just make sure you read the contract.

 

Remember that you typically get what you pay for, and keep in mind the cost of the policy, which averages about $400 per year.  And the contract is for a lot more things than the heating & A/C system too.  So most of these companies are pretty tight-fisted with the money. 

 

This is a complex scenario with a lot more factors than meet the eye.  Your R.E. agent gets nothing if you don’t buy the house, because it has an older system.  The R.E. agent informs the buyer that the seller is buying a home warranty policy for them, and “they’ll be covered” when a problem arises.  This has also been explained to the seller and recommended as a good sales strategy.  So it eases the seller’s conscience and also gives them an optimistic view about selling it quickly.  Everyone in this picture has something at stake – the buyer, the seller, the seller’s R.E. agent, the buyer’s R.E. agent, the warranty company, and their network of repair contractors.  Imagine things from their perspectives, and it will give you a lot better insight.  Don’t set your sights too high, and above all, read the contract carefully, and keep in mind the fact that you’re negotiating a price for the house the way the house currently is.  It already contains everything you see.  And the condition of all those things doesn’t improve after you purchase it.  Like us, everything in the house has a “reasonable life expectancy”.

 

Also remember that the contractors they send out aren’t necessarily the best ones they could find.  They are obviously the  ones willing to do business with the warranty company.  And regardless of their skill level, they’ll typically favor the band-aid approach to a problem, because that’s what the warranty company prefers. 

Some of the warranty companies are up-front, and send existing and potential contractors a list of common service operations, stating that they are willing to pay x amount for x repair.  I received one of these once and the dollar amounts listed were less than the going hourly rate for an experienced service technician employee.  Sure, some of the contractors know how to manipulate the system, but that might include cutting corners too.

 

The other issue is how long it takes the warranty company to dispatch one of their contractors to respond to a repair call.

I’ve seen this process take over two weeks.  I’ve run numerous repair calls for people willing to pay for repairs that would have only cost them their deductible amount had they used their warranty contractor.  I recently was horrified when I arrived at one of those calls and saw the dangerous condition of the furnace they had recently repaired.  The back end of the burners were rotted completely off.  But no mention of that was made to the homeowner.  And there was no band-aid available for this repair, because the furnace was so old that the burners were no longer available. 

 

I know some good warranty contractors, and I know some really bad ones.  And the same applies to the warranty companies that use them.  So it isn’t like home warranties are of no value.  But for policy holders, there is a fundamental difference between that scenario and one where you get to select the contractor and specify what you want them to do for x amount of your money.  Policy holders have no say in that.  You get the contractor the warranty company assigns to you.  The warranty company decides what work they are willing to pay for and what they are not willing to pay for.  And as far as equipment replacement goes, that works one of two ways.  1.  The contractor provides their (the contractor’s) brand and model, and submits an estimate to the warranty company for approval.  2.  The warranty company provides the equipment through a local equipment distributor which they have an established account with.  And the contractor merely gives them an estimate to install it.

You are not typically a part of the process.  Most first-time policy holders don’t realize any of this.  And some don’t like it very much when they realize how it works.  This system often works out fine either way.  But it often produces outcomes the policy holder doesn’t like.  Policy holders that understand the system are less disappointed with it, because their expectations are lower.  Some really like it, and often renew the policies each year at their own expense.  Some of these people figure that over time, their equipment will die and the warranty company will replace it.

 

But in my opinion, the biggest drawbacks are that you can’t select a contractor you know and trust, or one that has been highly recommended by friends, relatives or neighbors.  You’re at the mercy of the warranty company and the contractor they send. 

And both of their timetables might not match yours.  So it’s somewhat like being a renter rather than an owner, except that your money is also involved in the repairs.  And sometimes you are responsible for the entire amount.

 

People should have their system serviced regularly anyway.  So call a company you trust to do that service, even if you have a warranty contract in effect.  The contract doesn’t cover that anyway.  And it will put your mind at ease and the equipment will use less energy and you’ll be a lot safer.

 

“CONSUMER” ORGANIZATIONS

 

When I opened my own HVAC business, I had previously been just another idealistic, naive consumer who believed that these organizations were consumer oriented entities.  It took no time at all for me to learn that they were merely inserting themselves into the “food chain” by maintaining that illusion.  These businesses charge fees for membership, and some for advertising. 

In its simplest form, businesses pay a fee for membership.  That membership gives the business “protection” from the consumer, by supplying “arbitrators” when a customer lodges a complaint against that business.  And obviously the business has more leverage in the arbitration process, as they’re paying members. 

Imagine that you’re suing someone in court, and the jurors are on the payroll of the person you’re suing.

 

The other less transparent operations that have appeared in recent years come under the guise of being ”referral” businesses. 

Folks, these are NOT CONSUMER ORIENTED entities.

 

Both of those type businesses call me quite often trying to sell me something.  And I can assure you that a lot of ethically and technically challenged HVAC companies are paying them well. 

 

 

 

 

 

 

 

Areas Served

Greater Kansas City including:

Johnson County, Kansas     Kansas City, Kansas       Kansas City, Missouri

Fairway, KS

Lake Quivira, KS

Leawood, KS

Lenexa, KS

Merriam, KS

Mission, KS

Mission Hills, KS

Mission Woods, KS

Olathe, KS

Overland Park, KS

Prairie Village, KS

Roeland Park, KS

Shawnee, KS

Spring Hill, KS

Stanley, KS

Stilwell, KS

Westwood, KS

Westwood Hills, KS

Copyright 2012 Leonard Arenson Heating & A/C

 

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