When you buy an older home, you run the risk that certain aspects of it may not be up to snuff. Years of usage can take a toll on a house, and to some extent, your seller can't be held liable if things break down shortly after you purchase an older home.
New construction, however, is a different story. When you buy a new home that's never been lived in before, you expect a certain quality. And, at the very least, you expect to not have to make major repairs shortly after moving in.
But what happens if subpar construction or a major defect rears its ugly head, and you do wind up stuck with repairs on your hands despite having bought a new home? Thankfully, there's a way to avoid that scenario: You can insist on a builder warranty when you sign your purchase agreement.
What is a builder warranty?
A builder warranty is a written warranty that protects you from financial loss from structural defects or problems with your new home shortly after purchasing it. A builder warranty is commonly offered in conjunction with a new construction purchase, and it's not something you pay for as a buyer; your builder should include it for free.
What does a builder warranty cover?
A builder warranty generally covers all items related to workmanship and construction on a new home, as well as related materials. These include:
- Electrical systems.
- Heating and cooling.
- Septic systems.
Of course, not all builder warranties are created equal, so you'll need to check the specifics of the warranty you're being offered to see exactly what items it covers.
How long does a builder warranty last?
Most builder warranties cover workmanship and materials on a new home for one to two years, but in some cases, you may be eligible for a longer period of coverage, like five to 10 years. Or, your warranty might provide varying periods of coverage for different items (e.g., one year for flooring but two years for waterproofing).
What isn't covered by a builder warranty?
The specifics of your warranty will depend on its language, but typically, a builder warranty will not cover the following items:
- Normal wear and tear -- things like chipped paint and scratched flooring.
- Household appliances.
- House settling.
- Weather damage.
- Flood damage.
- Insect damage.
- Any damage resulting from improper maintenance.
- Any damage that results from work performed by an outside contractor.
It's not a bad idea to have your real estate lawyer look over the terms of your builder warranty in the course of negotiating your home sale agreement. In fact, you can try to negotiate the warranty itself if you feel it should be more comprehensive.
What's the difference between a builder warranty and a home warranty?
Though you might hear the terms builder warranty and home warranty used interchangeably, they're not the same thing. A builder warranty is something a builder provides, at no cost to a buyer, for a new construction home. A home warranty, on the other hand, is something you might purchase when you're buying a home that already exists.
A builder warranty is specifically designed to cover workmanship on the home. A home warranty, on the other hand, typically covers appliances and major systems (like plumbing, heating, and cooling).
How to file a builder warranty claim
Your builder warranty should spell out the process for filing a claim should the need arise. In some cases, you may need to provide photos of the issue in question and submit those along with your claim.
Of course, there is the possibility that your builder will dispute your claim, in which case you'll need to refer to the terms of your warranty on what to do if that happens. You may need to get an attorney involved if you and your builder can't come to terms.
That said, if you have a good relationship with your builder, you may not need to deal with the hassle of filing a warranty claim. In some cases, simply contacting the builder may be enough for him/her to come out and address the problem.
What happens to your warranty if your builder disappears?
It could be the case that your home builder goes out of business or files for bankruptcy during your warranty period. But what happens then?
Unfortunately, to some degree, you may be out of luck, but if that happens, look to manufacturer warranties instead. For example, say your water heater stops working after 18 months when it should easily last closer to a decade. Though your builder may not be around to come in and fix it, the manufacturer of that heater may step in and see to it that it gets repaired at no cost to you. That said, manufacturers usually only stand behind their products when they're installed properly, so if that's not the case, you may, again, be out of luck.
It's important to vet your builder before signing a contract to avoid a scenario where your warranty is rendered useless. A builder who's been in business for many years and has strong references is generally a safer bet than a newer builder without a solid portfolio of long-standing homes.
Should I buy new construction without a builder warranty?
Builder warranties don't offer unlimited protection, but they're an important thing to have. If you're buying a newly-built home and your builder refuses to include a warranty, you may want to ask yourself why that is. Not providing a warranty is a sign that your builder may not be trustworthy or may not provide the quality of construction you think you're paying for, which means you may want to run the other way.
What happens once my builder warranty expires?
As is the case with all warranties, once your builder warranty coverage expires, you have no right to demand anything from your builder. But you may find that your builder steps up and helps out even if he/she isn't obligated to. Doing so could work wonders for your builder's reputation, so don't assume you're out of options once that warranty is no longer in effect.
The bottom line on builder warranties
A builder warranty is an important thing to have when buying a new home. Just don't assume that warranty will mean you won't spend any money on repairs during the first few years after you move in. At the same time, having that warranty could spare you a major financial headache if a substantial issue comes up.
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