What is a builder's home warranty and why should I get one?
The homebuying process can be quite stressful and difficult for first-time buyers. This can be even more true when buying a newly built home. Buyers often have concerns about the structural integrity of homes that have never been lived in, and for a good reason. Many of us have heard horror stories about unsuspecting homebuyers moving into their new home, only to meet a slew of problems that range from poorly fitted insulation to uneven floors. Though this is rare, it does happen from time to time.
To relieve some of these worries, homebuyers who purchase a newly built home are usually encouraged to get a “builder’s home warranty.” The builder offers this warranty, and it differs from the standard home warranty you can get on your own. What exactly is a builder’s home warranty? Should you get one? This article will answer these questions in detail and go over what a builder’s home warranty covers.
What is a builder warranty?
A builder warranty is a commitment by the builder to make specific repairs or replace defective elements for a set period after a house is purchased. It applies strictly to new home constructions and remodels undertaken by the builder. A builder’s home warranty covers issues relating to structural elements, materials and home systems installed by the builder’s team. The instructions for filing a repair claim are outlined in the warranty. Homeowners are advised to put their request for repair into writing to avoid any potential disputes down the line.
It’s worth noting that in some states, such as New Jersey, builders are legally required to provide warranties to homebuyers. The law also requires builders to provide warranty follow-up services. If a builder fails to make repairs on claims for which it has been found responsible, the State New Home Warranty Security Fund covers the costs. In most states, however, the builder’s warranty is optional and subject to an agreement between the two parties. Most homeowners opt to get the builder’s warranty because it removes worry from the purchase and assures them that the builder stands behind its work.
What’s the difference between a builder’s warranty and a home warranty?
While both warranties provide coverage for home repairs and replacements, it’s important to note that a builder warranty is distinct from a home warranty. Here are some major differences between the two:
- Warranty provider. The builder provides a builder’s home warranty. The homeowner doesn’t pay any monthly fees, and in many cases, the warranty cost is rolled into the price of the home. Home warranties, on the other hand, are obtained by the homeowner either through the seller or a third-party warranty company. A home warranty is subject to a monthly or yearly fee and a service fee.
- Warranted homes. A builder’s warranty only applies to newly built homes, while a standard home warranty applies to both new and existing homes.
- Coverage. Another key difference between the two warranties is the coverage they provide to homeowners. Home warranties are service contracts that cover systems and appliances likely to break down outside the warranty period. By contrast, a builder’s warranty only covers the materials and workmanship used to complete the construction.
- Cost. A home warranty functions as a service contract and covers a wide range of appliances and systems. As a result, it’s more expensive than a builder’s warranty, which is typically factored into the price of the home.
- Flexibility. The terms of a builder’s home warranty are inflexible and inherently bound by the construction process. Inversely, homeowners can personalize home warranties to fit their needs. They can customize everything, from the extent of the coverage to the service-call fee amount.
- Time. Standard warranty plans can renew every year for however long the homeowner desires. On the other hand, a builder’s warranty is only valid within a set period, usually 10 years after purchasing a newly built home.
Builder warranty coverage
Now that we’ve outlined the major differences between a builder’s home warranty and a home warranty, the next section will discuss the repairs and replacements covered by a builder's warranty.
What is covered in a builder’s warranty?
As we mentioned, a builder’s warranty covers all the materials used in building the home and the workmanship that went into its construction. The terms of the agreement may differ from one policy to another, but most builder warranties cover the following items:
- Major structural defects. These are serious issues that require immediate intervention. If ignored, structural defects can threaten the integrity of the house. The builder’s warranty covers roof framing systems, load-bearing walls, beams, columns, foundation systems, footings, girders, lintels and masonry arches.
- Essential home parts. These are the major systems in your home, such as heating, ventilation, air conditioning (HVAC), electrical systems, plumbing and ductwork.
- Exterior elements. The builder’s home warranty can cover several exterior components of the house. These include shingles, windows, doors, paint and landscaping.
- Materials and workmanship. This part of the warranty covers any issues from material defects or subpar workmanship. Some covered areas include insulation, drywall, poorly installed windows and splitting wood.
What is not covered in a builder’s warranty?
Builders warranties don’t cover everything when it comes to the home. This is why homeowners need to have a clear idea of what’s not covered before they sign on the dotted line.
Since a builder’s home warranty’s coverage only extends to the materials and workmanship used to build the home, the warranty does not cover the following:
- Damages sustained from the weather. The warranty does not cover damage sustained from natural disasters or other unexpected weather-related occurrences.
- Normal wear and tear. Some of the materials used to build the home will deteriorate over time. The warranty does not cover normal wear and tear.
- Insect damage. Damage caused by insect infestation is not covered by the warranty.
- Household appliances. A builder’s warranty does not cover household appliances or other items under a service contract.
- Damage from additions to the home. The warranty does not cover damage sustained from additions made to the home by the homeowner or another contractor.
- Minor damage. The definition of what constitutes “minor” may differ depending on each warranty agreement. As a rule of thumb, small cracks in the tile, bricks or drywall are considered minor damage and are therefore not covered by a builder’s warranty.
To sum up, a builder’s warranty does not cover any repairs resulting from normal use, minor damage, abnormal occurrences or another party’s additions to the home.
How long does a builder’s warranty last?
The majority of builders’ warranties offer different levels of coverage for set time frames. The most common builder warranty timelines you will encounter are structured as follows:
- The first year of limited warranty coverage. This area of the warranty covers any issues from workmanship, materials and external components, such as drywall, paint, trim, stucco, decks, patios and sidewalks. Keep in mind that the warranty only covers extensive damage.
- Two years of limited warranty coverage. This part of the warranty covers essential home parts. This includes major systems like HVAC, plumbing and electrical systems. Again, home appliances under a manufacturer’s warranty are not covered here.
- 10-year warranty coverage. This portion of the builder’s warranty covers major structural defects. Foundation problems, damaged roofs, compromised floors and load-bearing elements are all defects covered by the structural warranty.
Is a homebuilder’s warranty worth it?
There are many advantages and drawbacks to getting a builder’s home warranty. Let’s weigh the pros and cons and determine whether owners of newly constructed and newly remodeled homes should get a builder’s warranty.
The pros
- It alleviates homebuyer concerns. Buying a newly built home can be just as stressful as exciting. This is especially true if you happen to be a first-time buyer and are not entirely sure what to look for about assessing construction quality or checking for potential defects. A builder’s warranty takes the worry out of the homebuying process.
- It’s essentially free. Unlike a regular home warranty, a builder’s warranty doesn’t come with monthly fees and service fees. The warranty cost is usually incorporated into the price of the home, so there is no reason not to opt in.
- It guarantees excellent workmanship. If there is one thing you don’t want to deal with when buying a new home, it’s shabby workmanship. A builder’s warranty eliminates this concern and ensures that the materials and workmanship are up to industry standards.
- It covers expensive repairs. Major structural repairs can be quite costly. For instance, a severe foundation problem can run up to $25,000, while a roof replacement can easily set you back $40,000. Unless you have a financial contingency plan for these repairs, one structural issue can erode your savings. A builder’s home warranty plan foots the bill for you and saves you from paying for expensive repairs out of pocket.
The cons
- It has limited coverage. Despite providing coverage for many integral components of your home, builders warranties still offer relatively limited coverage. Unlike a home warranty, a builder’s warranty doesn’t cover minor damage or home appliances. It also doesn’t provide coverage for the degradation of materials, damage caused by weather or subpar repairs by outside contractors.
- It has time-restricted coverage. A homebuilder’s warranty is only valid within tight time frames. Most expire after 10 years and only offer coverage for major structural damage after the first two years of limited warranty.
Although we have identified some negative aspects of builders’ warranties, a careful analysis of the facts reveals that the pros associated with getting the warranty far outweigh the cons. The peace of mind that homeowners will enjoy knowing that their home is protected against the cost of expensive repairs easily offsets any coverage or time restriction. Moreover, homeowners can still get a home warranty that complements their builder’s warranty and extend the coverage to their home appliances.
Save money on costly repairs with a Cinch home warranty
As a new homeowner, you can never be too careful when making sure your home is structurally sound. Getting a builder’s warranty is the first step toward peace of mind. That being said, there is no reason why you shouldn’t extend the coverage to other parts of your home. As we outlined above, a home warranty can perfectly complement a builder’s warranty, thus giving you greater financial security and coverage. Luckily, you don’t have to look too far to find a good home warranty. Cinch Home Services offers homeowners several warranty plans with customized levels of coverage.
The first plan is the Appliances plan. It covers clothes dryers, clothes washers, cooktops, dishwashers, range exhaust hoods, refrigerators, trash compactors, wall ovens, food centers, freestanding ice makers, microwaves (built-in) and ranges.
The second plan is the Built-in Systems plan. It offers coverage for smoke detectors, sump pumps, toilets, water heaters, whirlpool/jetted tubs (built-in), electrical systems, garage door openers, garbage disposals, heating systems, instant hot/cold water dispenses, air conditioning, attic fans, ceiling fans, central vacuums, doorbells and plumbing systems.
The third plan is the Complete Home plan. It covers everything that the Appliances and Built-in Systems plans cover, plus reimbursement of a portion of your homeowners insurance deductible.
To learn more about Cinch’s services and plans, contact us today and get a quote.