Homeowners are increasingly being asked to choose from a list of 'preferred' contractors for renovations and repairs, but many don’t realize these arrangements can lead to higher prices and limited options. A growing number of service providers are leveraging these partnerships to lock in long-term customer relationships, often at the expense of consumer choice and cost transparency.
- Preferred vendors can cost up to 25% more than independent contractors.
- Average cost increase of $1,420 on projects over $5,000.
- 68% of homeowners using preferred vendors reported overpaying.
- Some vendors require upfront deposits or long-term commitments.
- Common in insurance claims, often limiting consumer choice.
- FTC has seen increased complaints about forced vendor selection.
Many homeowners are being presented with a seemingly convenient option: a pre-approved list of 'preferred vendors' for home improvements such as roofing, HVAC, and flooring. These lists, often promoted by mortgage lenders, insurance companies, and home warranty providers, are marketed as a way to simplify the hiring process. However, recent data shows that services from these vendors can cost up to 25% more than comparable work done by independent contractors. A 2025 industry analysis revealed that 68% of homeowners who used a preferred vendor reported paying more than expected, with an average cost increase of $1,420 on projects valued at $5,000 or higher. In some cases, preferred vendors charged premium rates not due to better materials or labor quality, but because of referral agreements or commissions paid by the recommending entity. For example, a single roof replacement project in suburban Atlanta saw a $2,100 markup when completed by a preferred vendor versus a local, non-affiliated contractor. The impact extends beyond price. Homeowners may face reduced flexibility in scheduling, limited material selections, and less transparency in service contracts. Some preferred vendors also require upfront deposits or long-term service commitments, creating financial pressure and reducing the ability to shop around. These arrangements are particularly common in insurance-related claims, where policyholders are steered toward approved contractors even when they have a pre-existing relationship with a different service provider. Regulators and consumer advocates warn that while preferred vendor programs may offer short-term convenience, they often prioritize corporate partnerships over consumer interests. As more homeowners become aware of the financial and operational trade-offs, demand for greater transparency and the right to choose independent contractors is rising. The Federal Trade Commission has noted an uptick in complaints related to forced vendor selection, signaling potential regulatory scrutiny in 2026.