Despite the builder's ability to deliver the best construction practices, unforeseen problems and liabilities may arise with a new custom home. For this reason, a homeowner should have a clearer understanding of home warranties and what coverage they provide.
So, what exactly is a custom home builder's warranty, and how is it beneficial to the builder and homeowner? A home warranty is a service contract agreement extended to a homeowner by a builder. It promises to cover the costs of repair or replacement of certain parts of a newly built home and major appliances inherent to the house within a specified time frame from the date of completion.
While home warranties may differ from builder to builder, often, defects covered may include siding, doors, windows, roofing, plumbing, electrical systems, and water heaters caused by sudden failure, faulty and incomplete construction, or everyday wear and tear. It's common for homeowners to erroneously assume a home warranty and an insurance policy are the same things. An article by Investopedia titled "Home Warranty vs. Home Insurance" hints that both will safeguard your home should anything go wrong—but the difference is that a new home warranty does not cover damage covered under homeowner's insurance.
As a homeowner, it makes sense to want a home warranty to have peace of mind as you settle into your home. And should your new home's built-in systems and appliances get pushed too far too soon, an existing service agreement cushions you against the financial burden associated with repairments—significantly lowering your cost of home ownership. Best of all, warranty protection gives the homebuilder a chance to show they prioritize your home's safety and stand behind the quality of their work.
Below, we will discuss the different types of home builders' warranty, what it covers, and how a service contract agreement ensures the longevity of your home.
Here is a look at each new construction home warranty you can expect to come across:
Whether written in the contract or not, an implied warranty of good workmanship—also known simply as a workmanship warranty—requires that the newly constructed home meets reasonable standards of quality. That is, the construction work should be performed and completed in a "workmanlike manner" and in accordance with the accepted standard of skill and care.
Even if the builder's work does not impair habitability, a warranty of good workmanship is an obligation to deliver a certain quality that is uniform to the construction industry. Failure to comport with the required standards means the homeowner may have a cause of action against the builder. In his article "An Implied Good Workmanship Warranty Exists for ALL Construction Work" for the Level set, Alex Benarroche explains that implied warranties are inherent in the residential construction contract, whether written or not.
Another significant warranty is the implied warranty of habitability: which is an unstated guarantee that the newly constructed property is suitable for the purpose it is intended for, free of defects, and safe for human habitation. In some states, this new construction home warranty cannot be waived or disclaimed by either the homebuilder or homeowner.
An express home warranty is a verbal or written contract created to ensure quality work that's free from defects. This agreement outlines all the complaints to be covered by the builder within a specified period after substantial project completion. According to Marlowe McNabb Machnik's article "Construction Warranties," this service contract agreement may specify homeowners' responsibilities, including dispute resolution details and steps to take to notify the builder of any warranty issue.
When a state requires that the builder warrant that the work will comply with all applicable requirements on completion of a construction project, it is known as a statutory warranty, this warranty gives the homeowner comfort about the state, quality, and performance of a new residential build. This builder's warranty on new homes covers everything from faulty workmanship and materials to poor installation of plumbing and electrical systems and can last for ten years from the date of practical completion.
Below are the basics on the different coverages offered by a home warranty:
Based on the type of construction work provided, builder warranties for new custom homes are typically a combination of time periods. For instance, it may be devide into terms of one, two, and 10 years. Homeowners can expect the following coverage:
One year coverage
The one-year builder's warranty is a workmanship or "fit and finish" service contract agreement effective the day the home closes. It often covers installation and general workmanship errors, including defects for components such as exterior siding and stucco, drywall, paint, interior trim, hardwood floors, and fireplace if you have one.
The two-year coverage is a mechanical systems warranty effective the day the home closes. It provides surety coverage for behind-the-wall components that do not meet the established performance standard. Namely, piping, duct work, electrical wiring, ventilating, and cooling system.
Ten Year coverage
The 10-year house builder's warranty is a structural service contract agreement. This coverage typically has the longest lifespan and is arguably the most important. The structural warranty covers the load-bearing elements of a new build, including footings, foundations, beams, columns, roof framing, and other defects that make the home unsafe to live in. In addition, this warranty can be transferred to the new homeowner should you decide to sell your house within the 10-year time frame.
Typical exclusions from a home warranty include structural damages as a result of weather conditions or natural disasters, household appliances that are consumer products, insect damage, deterioration due to shrinkage or expansion, normal paint fading, damage caused by work done on the property after the builder's work is complete, damage caused by outsiders, and dampness due to failure to maintain adequate ventilation. Another component not covered is any detached structure that wasn't part of the home's original construction.
A builders warranty for new construction is worth considering to protect your home's structural integrity so that you can enjoy it to the fullest. An article by Investopedia titled "Do You Need a Home Warranty?" suggests that a warranty is a great way to protect yourself from unexpected expenses to repair qualified structural defects discovered after closing. You can rest easy knowing situations will attend to immediately and that the value of your property investment won't diminish over time.
A standard builders warranty is purely optional. For homeowners, the choice protects your investment and removes the worry from ownership. A builder refusing to provide a home warranty should see it as an indication that they do not stand behind the quality of their work.
Firstly, check if the defect is covered by the builder's warranty and what it says regarding the procedure for making a warranty request. An article by FTC titled "Warranties for New Homes" suggests that it's best to put your claim for repair in writing even if the builder has provided a contact number for urgent requests.
Home warranties for newly built homes are not all the same. While designed to offer homeowners peace of mind, it is important to recognize that warranties may differ from builder to builder and state by state. However, what warranty bodies have in common is that they safeguard your investment by providing comprehensive protection against major structural defects.
That said, a builder's warranty is in place to protect you and ensure that your home has built to a good standard. Key to the strength of a warranty is that the builder will rectify any issues that arise due to faults in design and workmanship. In addition, you must understand the fine details to decide on a solution that suits your specific needs best.
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