The Real Cost of Aftercare For New Homes

7th May 2019

Just like anything else a business needs to pay for … insurance, IT, recruitment, training, marketing, etc., there is a cost to providing aftercare for new homes. You cannot successfully combine aftercare responsibilities with another department, as the process requires a completely unique skill set and knowledge. It is a specialist area and needs to sit with specialists who understand the systems and processes of service outsourcing and customer interaction.  

Is customer care for new builds expensive?

The answer to this question depends on a number of factors, but yes it can be expensive. However, the repercussions and costs of your business not having the right systems in place will usually be far greater – so working with customer service specialists is very much advised.

At After Build, we are an industry outsource specialist that provides after care for new home purchasers. We manage the new home developer’s obligations during years 1-2 of the structural warranty, providing exceptional services through a unique fixed-price agreement, ensuring complete financial efficiency from start to finish.

However, new home developers often greatly underestimate the true cost of providing good customer service for new builds. This is because they often fail to count the plethora of costs that remain hidden within the wider structure of their business. One of these overlooked costs we call ‘management distraction’, which describes the cost of after care when a problem has been ignored and eventually gets escalated to a higher managerial level.

The exact figure of the management distraction is formulated by taking the salary of a senior director, [£75,000 pa] which is then expressed as 0.1% of the value of their time per plot. Therefore, a development with 100 plots would be: 100 x £75,000 x 0.1% = £7,500. Although this may not seem like a lot in the greater scheme of things, it is still a perfect example of a cost that can be completely overlooked.

For any developer setting up their own aftercare resource, they need to take into consideration other similarly hidden charges, such as ‘compensation’. Based on experience, After Build has devised a formula, that accounts for any over and above spending which occurs to address issues that require compensating. This sum is the cost of the time it takes for the developer to make the problem go away or bring it to a reasonably satisfactory conclusion, being £56 per plot, per annum.

Costs such as salary also need to be considered, which is often largely influenced by the number of plots requiring cover from a team of specialist staff. This total is based on several factors, often being fundamentally based on the quality of the builds, as the higher the number of defects reported, the greater the workload. Based on our expertise, we have concluded that typically the working range is anything between 2 and 10 jobs per plot – which can be more if the properties were not snagged before legal completion occurred.

On top of both costs, there is also employer’s national insurance payments (13.8%) and employers pension contributions (3%), as well as employees’ holidays and absenteeism due to sickness. Many employers also don’t take into consideration any training required for their staff, as your coordinators will have to be trained at the outset to understand how to meet warranty build standards and carry out the defect management process. They need to be able to diagnose a problem and know if it would be considered a legitimate defect when measured against the relevant warranty build standards.

Taking into consideration all these costs and applying this to a development of 100 plots, with, for example, 5 jobs per plot, the cost is going to be £947 per plot per annum. This is a total of £94,700 per annum, which is a considerable cost to a small or medium-sized developer.

However, if you decide to work with a company to outsource customer service, such as After Build, you can save a significant amount of money on providing quality after care for new homes. As a leading outsourcing company, we can provide you with the same scheme with the same level of jobs per plot, at a fixed price of just £320 per plot pa, an annual saving of £62,664.

If you would like to better understand the resource you will need, and what this will cost your business should you decide to build your own internal team, you can use the After Build cost calculator on our website. It will also provide you with a fixed-price alternative and the savings that you can achieve.

To have a conversation with an exceptional aftercare company, please do not hesitate to contact the After Build team today. We would be more than happy to discuss your needs –  telephone us on 01444 460129, or complete and submit the contact form on our website.

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