Building Easier AI

Price the Warranty Callback Before You Sell the Job

M/I Homes, a public builder, sets money aside for warranty work on every house it delivers. Over the first nine months of 2026 that came to about $2,625 a home, close to the $2,675 of a year earlier (our arithmetic from its quarterly filing, Oct 23). The warranty claims it paid over the same months came to $33.0 million, against $18.7 million a year before: up 77%.

M/I can carry that: it books a reserve at every closing, pays claims out of it, and tops it up when they outrun the estimate. A business that books nothing pays the same bill months after the final invoice, out of whatever job is running that week.

A callback is a cost of a job you already sold. Price it in the estimate, and track which causes and which subs keep sending a crew back. Then check the law: federal warranty law reaches a remodel's materials but not a new home's or a substantial addition's, and a repair shop's warranty can land on either side, depending on whether it covers the parts.

What M/I and Pulte filed in October

M/I's 10-Q splits its warranty costs, and the routine part barely moved: $16.7 million booked on homes as they were delivered over nine months, from $17.7 million on more homes a year earlier. What moved came after delivery: $4.5 million in raised estimates on warranties already outstanding, against $0.5 million, and $7.2 million charged for unusual claims in two Florida communities, none a year earlier, which M/I says were "primarily due to attic ventilation issues." All in, M/I charged $28.3 million to warranty, about 70% above the routine accrual, and the Florida charge was about three-fifths of the $11.6 million excess (our arithmetic).

A per-home reserve is an average, and an average doesn't see a bad batch coming. M/I sets part of its reserve as "a percentage of average sales price" and reviews the structural part each year "with the assistance of an actuary," and it still had to raise its estimates on warranties already outstanding. One caution: settlements include claims on homes delivered in earlier years, so they can't be split per house delivered this year.

PulteGroup's 10-Q, filed Oct 22, shows payments running ahead of provisions, as they did a year earlier. In the third quarter it paid $25.5 million in warranty claims against $21.3 million provided, 119%, against 120% in the same quarter of 2025; over nine months, 114% against 103%, because provisions fell faster than payments (our arithmetic). Its reserve stood at $123.6 million, from $132.3 million a year earlier. The provision per home closed went both ways: up about 10% in the quarter, to $3,103, and down about 5% over nine months, to $3,215 (our arithmetic).

Lumpy, not rising

Industry-wide, the numbers don't show warranty costs climbing. WarrantyWeek, a trade newsletter that compiles builders' filings, has warranty figures for 23 U.S. builders going back to 2003, of which 15 still reported them in 2025 (report published March 26, 2026). Those builders set aside $2,739 per new home sold in 2025, on average, against $2,643 across the 23 years, and the reporting builders' claims paid ($1.014 billion) and accruals ($1.031 billion) both fell on 2024, by 5% and 10%. Pulte's nine-month provision per home fell too, and most of M/I's extra charges this year sit in two Florida communities.

So warranty cost is lumpy, not rising: steady on average, until a bad batch lands in one place in one year. That's a reason to price it. At M/I's scale, 6,361 homes delivered in those nine months, a bad batch is a line in a filing. A remodeler finishing an illustrative 20 jobs a year has no stable average; one bad job can be the year's whole warranty bill.

Two things argue against us. We found no measurement of what callbacks cost small builders, remodelers or trade shops, and no evidence on how many of them price warranty in. The well-documented numbers belong to companies with thousands of closings and actuaries, so read them as the shape of the cost, not its size for you. And a warranty line costs something: it raises your price against a bidder who leaves it out. Their callbacks get paid too, out of a job they haven't sold yet.

The arithmetic for your own warranty line

Take an illustrative builder, with round numbers invented for the arithmetic: 12 homes a year, and callbacks costing $9,000 in labor, material and truck time one year and $31,000 the next, after one product failed across several houses. The two-year average is $20,000, about $1,670 a home. Price a $1,700 warranty line into each house and the quiet year leaves $11,400 unspent; the bad year runs $10,600 over. Across both years the line covers the cost, with $800 to spare, but only if the quiet year's money was still there when the bad year came.

Your version is the same division: callback cost over your last two or three years, divided by the jobs closed in them, then checked against your worst single year. To scale it with the job, as M/I does with sales price, make it a share: $1,700 on an illustrative $400,000 house is about 0.4%.

Before you settle the figure, sort the callbacks two ways. By cause, because an average hides the one detail that keeps failing, and that detail can be fixed in the spec instead of paid for again on every job. By sub, because part of a callback can be someone else's bill. M/I's filing: "Although our subcontractors are generally required to repair and replace any product or labor defects, we are, during applicable warranty periods, ultimately responsible to the homeowner for making such repairs." The homeowner calls you either way; whether the sub pays depends on your sub contract.

The same cost turns up outside home building. A fabricator's warranty return, a weld or a finish that fails in the field, comes back on the shop's time, out of whichever order is on the floor. A field-service shop's second visit on a repair it warranted comes out of today's route.

Where federal warranty law draws its line

Nothing here is legal advice, and this article drafts no warranty language. The federal law on written consumer warranties is the Magnuson-Moss Warranty Act, and the rule on what it covers, 16 CFR 700.1, draws lines that matter to a builder, a remodeler and a repair shop. We read that section in full, and one other, 16 CFR 700.11, on service contracts. We did not read the rest of part 700, 16 CFR 701 or 702, on disclosure and pre-sale availability, or any state's law, and state law varies. Take your warranty terms to your attorney.

Coverage turns on the product, not the customer. The Act applies to property "normally used for personal, family, or household purposes," and "the use to which a product is put by any individual buyer is not determinative." Where it is unclear whether a product is covered, "any ambiguity will be resolved in favor of coverage." A shop whose customers are businesses can't assume it sits outside.

A new home is mostly outside the Act. When a consumer contracts with a builder to construct "a home, a substantial addition to a home, or other realty (such as a garage or an in-ground swimming pool)," the building materials "are not consumer products." The paragraph before that one covers a finished home sold as real estate: "The beams, wallboard, wiring, plumbing, windows, roofing, and other structural components of a dwelling are not consumer products when they are sold as part of real estate covered by a written warranty."

Installed equipment is inside the Act. The Act reaches "separate items of equipment attached to real property, such as air conditioners, furnaces, and water heaters." It "does not extend to the wiring, plumbing, ducts…" behind them.

A remodel mostly reverses the new-home rule. Materials are consumer products "where a consumer contracts for the purchase of such materials in connection with the improvement, repair, or modification of a home (for example, paneling, dropped ceilings, siding, roofing, storm windows, remodeling)." The exception is the one above: the materials for "a substantial addition to a home" fall under the new-home rule.

A repair warranty turns on what it covers. "Warranties on replacement parts and components used to repair consumer products are covered; warranties on services are not covered. Therefore, warranties which apply solely to a repairer's workmanship in performing repairs are not subject to the Act. Where a written agreement warrants both the parts provided to effect a repair and the workmanship in making that repair, the warranty must comply with the Act and the rules thereunder." For a field-service owner repairing a consumer product, a workmanship-only promise sits outside the Act; parts and labor together sit inside it.

A promise the customer pays extra for is a different thing. Under 700.11, an agreement "which calls for some consideration in addition to the purchase price of the consumer product" is a service contract, not a written warranty. The warranty line in this piece is a cost carried inside your price, not coverage sold on top of it.

So one written promise can land on different sides of the line on a spec house, a kitchen remodel and a furnace repair, which is why the attorney should see it before a client does.

Put the line on the next estimate

Before the next estimate goes out, put a warranty line in its costs: a dollar figure per job or a share of the price, from the arithmetic above, carried inside the price rather than shown to the client as something to buy. If you have no history to divide, set a figure anyway and write down why you chose it, so next year's callbacks can correct it.

Then decide, before the job closes, what that money is held against: a separate account, or at least its own line on the books rather than the operating balance; the warranty period you're actually promising; and what happens to whatever is left when that period ends. How it's booked and taxed is your accountant's call. Money left when a job's warranty runs out is that job's margin, finally earned. Money spent before then pays the callback out of the job that caused it, not whichever one happens to be running.