If It Seems Too Good to Be True…

Yesterday my HVAC guy came out for my seasonal checkup.

That, in and of itself, makes for a fascinating update.

But there are tons of broader financial lessons to be learned from my humble HVAC system. It’s like a metaphor or something.

Since all homeowners should have HVAC service on their minds right now, the timing’s right to pass these lessons on. Today is lesson 1.

Lesson #1: If it seems too good to be true, it probably is too good to be true

My family has been using the same HVAC service company for about the last 40 years. They appear to be honest, as far as I can tell. I pay them over $400 annually for a service contract: they come out in the spring for the AC and in the fall for the furnace, and the contract includes discounted service calls and cheaper parts / repairs when needed.

(For reference, my system is a natural gas forced-air furnace and central AC. I have 3 units, which I readily concede is absolutely ridiculous. My house makes sense in a broader context – like I have one of the smallest houses in a great school district – but its size and 3 units still pain me.)

Yesterday, the tech was here for ~1.5 hours. In the spring, the tech was here for ~2.5 hours.

That’s 4.0 hours by my calcs. @ $400, I believe that works out to…$100 per hour. Go math!

This may be a bit pricey, but when you factor in…

• The wage you need to pay a skilled HVAC technician;
• Time and admin beyond the service call itself;
• Discounted services when I have a problem; and
• Profit for the company

…perhaps it’s kinda reasonable. I’ve also benchmarked my HVAC service cost with some other companies, and they are generally close.

Except for one. There is one company who is absolutely killing the market. Let’s call them “DCH”. Their trucks are everywhere, and many of my neighbors use them. Their annual charge for HVAC service is $99 – and it doesn’t matter how many systems you have! One HVAC system? $99! Three systems? $99! 17 systems (which would be a largish house, granted)? $99!!!

Oh and it gets better. In addition to doing full service on your HVAC, they’ll check your plumbing too! They’re going the extra mile because they care about you so much.

They’re doing more at ¼ of the cost “the other guys” charge. What a bargain! It seems almost too good to be true…

And that’s exactly where we should tap the brakes. Does anyone see any problems with this math? I just checked with my friend google, who informed me that an average HVAC tech makes ~$21 per hour, and an experienced one makes ~$34 per hour. That doesn’t include time between service calls, the cost of the truck, an office & other administrative expenses, or the small matter of what I like to call “profit”.

If DCH added me as a customer, spent at least 4.0 hours out here for spring and fall service, and only charged $99, those morons left nothing for themselves. Are they running a charity? Are they just stupid? Who cares? I’m making out like a bandit!

…It Most Definitely Is Too Good to Be True

At this point, most blogs would point out the obvious risk, tell you “let’s be careful out there”, and wrap things up.

But not around here. I go the extra mile. Awesomely, I have actual experience with DCH – I am a former customer! No, this wasn’t a younger, stupider me. I’ve known Lesson #1 for a very long time.

My spin with DCH was pure serendipity – when I bought my current house, the previous owner had an annual contract with them, and (lucky me) it was assigned to me for no fee at all. I set up a “free” service call for them to do the heating checkup.

Three young fellows in nice crisp uniforms came out to check my furnaces. And plumbing, of course. Don’t forget a plumbing check is included. When I casually mentioned I’d want a quote for the annual service contract before they left, we had a funny little miscommunication. He said it was $99, and I asked, “Don’t I get a discount for the 2nd and 3rd units?” He smiled proudly and said, “No sir, it’s not $99 per unit – it’s $99 total! No matter how many units you have!” That’s when the klaxon sounded in my head, and I started noodling on how this could possibly make sense.

They were doing all sorts of stuff for well over an hour. They started off in happy, chipper moods, but as they spent time in the attic and running around everywhere, their faces got a little longer, and they started to share, in somber tones, professional sounding, technical-term-laden concerns with each other.

Finally, the senior tech approached me with a grim face to review the service call and its aftermath.

Let’s pause for a second to review:

• I had just bought the house with, of course, a thorough inspection (bonus: I used the same trusted inspector I had used twice in the past)
• We’d been living in the house for over a month and all appeared well

Any guesses on what happened next? I’ll give you a hint, which may be a bit shocking to you: they actually found some stuff that needed fixin’. Any ideas on the size of the quote?

If you guessed several hundred dollars, I really admire your optimism and faith in your fellow man.

If, however, you guessed $5,800, you’re right! Greetings, fellow cynical pessimist.

If you’re really interested in what happened next, I’ve included those details in an afterword below.

But the summary is that this was con artistry at its highest. The $99 fee was just to get in the door and start the con. I’m sure they would do the service call for free if they could, but they have to charge something to look a wee bit less dodgy. The $5,800 of additional work was the missing link to nice, fat DCH profits.

DCH had a script they trained folks to use, and I believe they have a long history in my fair burg using misinformation (bordering on outright lying), fear mongering, and hard sales tactics. I did nothing they advised, escorted them out, and declined to set up my spring AC service appointment.

I’d like to think I averted a disaster due to my awesome HVAC knowledge and expert ability reading people, but that’s not it. I just knew a $99 service call for 3 units was too good to be true, so I was on full alert. Once I saw the swindle unfolding, I didn’t have to figure out where truth and falsehood lay. I assumed everything was a lie and knew I’d need to rehire my ol’ reliable company.

I’ve done my best to warn everyone I know about this company, but they continue to be used by many in my neighborhood. They think I’m the rube for paying over $400 for my service contract.

Lesson Learned

Any time you’re at an informational disadvantage, there’s a risk that you’re going to get ripped off. I don’t know enough about HVAC systems (or plumbing, or car repairs, or lots of other stuff) to guarantee I keep service providers honest. I’m sure I’ve been taken before, and will be taken again – that’s life.

But that doesn’t mean we’re completely helpless. We can get a little educated. We can get multiple quotes (and no, the lowest price is not always best). We can bring some healthy skepticism and ask a lot of questions.

Your gut is there for a reason. If something doesn’t make sense to you, it’s worth finding out why. Maybe it’s your lucky day, or maybe there’s something darker afoot. A little napkin math can help, and understanding someone’s incentives can go a long way to explaining their behavior.

If I told you I’d sell you a new iPhone for $50, you’d have your own klaxon sounding in your head. But once folks get outside of products or services in their comfort zone, they’ll often turn off their b.s. meter completely.

Whenever you come across something – in services, in investments, in finance, in life – that seems too good to be true, it probably is.

There you have it – lesson #1 from my HVAC. More is coming, and soon.

And hey, let’s be careful out there.

 

Have you ever been snookered by an HVAC contractor, or narrowly averted disaster? Let me know your own experience in the comments.

 

Afterword: if you really want to know the details of my DCH quote.

The recommended repairs included:

• Several super-technical-sounding things for one of my furnaces
• A new hot water heater (plumbing is also included, remember?)
• New ductwork for my entire HVAC system
• A new garbage disposal (you may have forgotten, but this company also inspects plumbing)

He relayed these repairs in a manner suggesting I – and more importantly my wife and precious child – were in imminent danger. I had just a few questions:

• Furnace stuff
  Paul: I understand it may need new parts, but if so, why is it still working?
  DCH: It may be working now, but there are some parts that are designed to wear out, and there’s a chance one of those could fail.
  Paul: That totally makes sense. And I’d estimate that chance at roughly 100%.
  DCH: [looks confused]
  Aftermath: when I had my reliable HVAC contractor out, he said everything was cool (get it? that’s an HVAC joke) / nothing was wrong.
• Hot water heater
  Paul: Why does it need replacing?
  DCH: It’s really old.
  Paul: Yes, it’s 8 years old.
  DCH: If it fails, it could flood your house and cause tens of thousands of dollars of damage. [my stupid house does have hot water heaters in the attic, so this is not unheard of]
  Paul: But it isn’t rusted at all at the bottom and looks fine right now. I just drained it and there wasn’t any rust or sediment.
  DCH: Yeah, but trust me, I’ve seen them fail and it can be a real disaster.
  Aftermath: it lasted 7 more years, and thankfully didn’t flood the house when it started to fail – the drain pan worked as it should.
• Ductwork
  Paul: What’s wrong with the ductwork?
  DCH: It’s old and is not doing a good job removing pollutants and allergens. You have a young child, right? It’s really important to remove as much of the outside air pollutants as possible to prevent children from getting sick or developing asthma, and this old ductwork can’t do that.
  Paul: So should I also close the windows? [It was a mild Texas winter day, and I had stupidly opened them to fill my house with poisonous outside air].
  Aftermath: when I had an HVAC unit replaced ~3 years ago, 3 different contractors said I had really good ductwork and wouldn’t recommend doing anything to it. So I’ve got that goin’ for me.
• Garbage disposal
  Paul: What’s wrong with it?
  DCH: [runs disposal, it sounds kinda grindy] It’s on its last legs – it shouldn’t be making that rough of a sound. You definitely don’t want your wife reaching in there to clean it out!
  Paul: Can we check when it was installed? [looks under sink, finds sticker] It looks like it was installed by you guys less than a year ago. Is there any sort of warranty or something on your work?
  DCH: Well, it’s not that bad now, but you should really keep an eye on it.
  Aftermath: it lasted 8 more years. I even replaced it myself. And my install (same model) sounds smoothly musical, as far as garbage disposals go. Bonus: my wife still has all her fingers.

Interestingly, there was one critical item from my buyer’s inspection report that DCH didn’t identify – a small but real risk dealing with a gas line that could in fact have killed my family / blown up my house (a flexible line entering the furnace s/h/b encased in a pipe at the entrance – my normal HVAC company brought this up to current code on their first visit). I really can’t blame DCH for missing this, though – there were so many glaring problems with my house they were already overwhelmed.