When it came time to replace the heating and air conditioning system, I expected to spend a significant amount of money. What I didn't expect was a $10,000 difference between HVAC contractors competing for essentially the same job.

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As a real estate investor, I've worked with plenty of contractors over the years. I understand that businesses need to make a profit, employees need to get paid, and quality workmanship matters. But my recent experience getting HVAC replacement bids opened my eyes to just how differently companies price their services.

And it made me wonder: Are homeowners paying for a better HVAC system, or are they paying for the HVAC company's advertising, sales commissions, and overhead?

The Three Bids: $24,000, $22,000, and $14,000

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The difference between the highest and lowest bid was $10,000 — approximately 42% less than the highest quote.

These were bids for replacing a 5 Ton Electric heating and cooling equipment in the same house. Yet the pricing differences were enormous.

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One thing that stood out during the bidding process was how much time and effort some larger HVAC companies invest in the sales presentation.

The process can involve a lengthy in-home inspection, discussions about efficiency, equipment options, financing, warranties, and the benefits of choosing an established company. Some presentations can take two hours or longer!

 

There's a difference between performing a proper HVAC assessment and delivering an elaborate sales presentation designed to justify a premium price.

Large HVAC companies often have substantial operating expenses:

• Television, radio, internet, and digital advertising.

• Call centers and appointment-setting departments.

• Salespeople or comfort advisors that earn HUGE commissions.

• Branded fleets, management teams, and administrative staff.

• Financing programs and promotional campaigns.

All of these expenses must ultimately be supported by the company's revenue.

The question homeowners should ask is whether the additional price delivers additional value. 

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My experience changed when I received a quote from a smaller contractor that does not have the same overhead and pays nothing in PPC advertising, has no sales reps, or call centers, just a perfect 5 star review rating from hundreds of happy customers. That experience reinforced something I've learned repeatedly as a real estate investor: smaller contractors with lower overhead can provide substantial savings without sacrificing quality or warranty.