A home builder's warranty is mandatory for all newly constructed properties today. It's the kind of protection that gives buyers invaluable peace of mind. But most importantly, it also protects the interests of builders. However, it is important not to confuse the builder's warranty with the home warranty. They are very different services that can complement each other, but not replace each other.
What is a home builder warranty and what does it cover?
Newly constructed home warranties are a type of third-party protection offered to buyers, but they are purchased by the builder. Today, offering this type of guarantee is not a mandatory rule. However, VA and FHA require this coverage to be present for homes purchased with VA or FHA loans.
Note that the actual coverage of such policies is quite limited. Most of them only cover structural elements of the new building, as well as materials and labor. Plans range from six months to two years, but there are some options that offer protection for ten years. The latter type is generally restricted to covering major structural defects.
Typically, a construction company's warranty would cover:
- Foundation and floors
- Carpentry
- Waterproofing
- Thermal and moisture coverage
- Lath and tiles
- Isolation
- Roof and siding
- Glass
- Doors and windows
- garage doors
- Landscaping
- Plumbing
- Electrical wiring
- Septic system
- Heating and cooling systems
- To paint
It's important to note that builder home warranties generally do not cover damage caused by:
- Any works carried out by owners or contractors they hire
- Expansion and contraction of the building (including joint cracks)
- Climate and natural disasters
- Natural fading of paint and degradation of other materials (if it occurs at a normal rate)
- Pest and insect damage
- Problems related to damp and condensation (if the cause is inadequate ventilation resulting from the owner's inability to maintain the property)
The exact list varies depending on the warranty provider, but they all have one main purpose, which is to protect the builder from lawsuits if something goes wrong with the newly built home.
And that's the most important difference between a builder's warranty and a home warranty. The latter is consumer-oriented, while the construction company's policy is a B2B service.
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Yes, it also protects the interests of the new owner. However, the type of coverage focuses mainly on reducing risks for the contractor. This is the main reason why every builder should use warranties offered by companies like StrucSure.
What exactly is a home warranty and why is it important?
A homeowner who wants to avoid paying large repair bills if a major system or appliance breaks down inside their home can use a home warranty service contract. This type of service will cost about $400-600 per year and will cover items that a builder's warranty does not. These items are mainly household appliances, from ceiling fans to refrigerators. But many plans today also offer optional coverage for pools and spas.
What's confusing is that home warranties also cover essential home systems like plumbing and electricity. And this is where the distinction between the B2B nature of the builder warranty and the B2C focus of the home warranty is most important. In the event of a dispute with the third-party warranty provider, the home warranty would prioritize the consumer, i.e. the homeowner.
Home warranty plans are also much more extensive and flexible in their coverage. This means that they will protect you not only in case of damage resulting from building construction defects. A home warranty plan differs from home insurance in a similar way in that the insurance only covers you in the event of damage caused by a pre-determined list of external factors.
However, home warranties are also poorly regulated. This means that it is always necessary to carefully study the terms and conditions of the plan to understand exactly what is included in the coverage.
What type of warranty should builders offer?
Companies that build and sell homes outright should consider offering both types of warranties to ensure their properties fill faster. According to statistics, properties with a home warranty sell out faster in about 11 days.
Including the builder's home warranty in the package is mandatory because it is the builder who avoids heavy legal action if it is used. However, a home warranty is a service that can be used specifically to attract buyers. It's not uncommon for construction companies to partner with home warranty providers to offer great packages for new homeowners.
However, some of these partnerships end in scandal. Therefore, it is essential that the builder carefully chooses the company he will work with. After all, their reputation will depend on it.
Does this mean a home builder must deal with two different warranty companies?
It's true that there are third-party warranty providers that specialize in structural warranties. They offer service packages specifically aimed at construction companies, which can be highly beneficial. However, they are also quite limited, as is the builder coverage they offer.
However, some of the top home warranty companies today also offer this type of service. More progressive and innovative providers, like 2-10 Home Warranty, offer service packages for consumers and builders. And if they're flexible, it may be possible to negotiate a customized plan that provides the broadest coverage at the best price.
As plans vary greatly, it is prudent for owners to carry out in-depth research into the guarantees they offer with the property. Those more experienced would know this and would no doubt appreciate it if the builder provided them with all the relevant information straight away.
The consumer's main concern is, of course, coverage. They need to understand exactly what the builder's warranty and home warranty cover for this specific property. They also need to know what the limits of these are and where they should turn to resolve any possible disputes. A builder who wants to establish a good reputation will make sure that the plans offered cover an extensive list of possible causes of breakdowns and have high payment limits.
