What Exactly Are Builder Warranties & Why Are They Important?

Home builder warranties are essential because they outline what contractors are and are not responsible for when it comes to repairs or replacements. 

It may sound like these official documents are for homeowners’ protection only, but builder warranties work for contractors, as well. 

As a contractor, how are you protected by a home builder warranty? Let’s go through the details below and find out.

What Exactly Are Builder Warranties?

A home builder warranty is an official statement given by contractors to homeowners. Builder warranties assure your clients that their house has been built according to an agreed-upon set of standards. These may be incorporated into your sales contract or handled as a separate document.

Homeowners are protected from unacceptable construction work, while contractors are protected from long term liability.

The content of a home builder warranty depends wholly on the contractor, particularly if you handle warranties in-house. You may even allow for some negotiation of terms between you and your homebuyers. However, you need to be sure that the builder warranties you offer are compliant with applicable laws. 

Third-Party Company Home Builder Warranty Plans

Home builder warranty requirements may differ from state to state, which is why third-party company handling of warranty plans can be a convenient option. 

Purchasing warranty plans from a third-party company can streamline the process and leave you to focus on what you do best: building. 

You may customize these plans depending on what you’re willing to provide your clients, too. Third-party companies may also include provisions for free mediation should that be needed during a warranty coverage dispute.

Home Builder Warranty Periods

There is no universally accepted format for builder warranties. Because of this, both warranty coverages and warranty periods may vary dramatically depending on contractors or third-party warranty providers. 

Many builder warranties specify separate warranty periods for different parts of a home. When a contractor offers a 10-year new home warranty, it doesn’t mean that everything is covered for that entire warranty period.  More on this later, when we go into warranty coverage details.

Builder Warranties vs. Home Warranties

These two types of warranties are similar but are not the same. The confusion may come from the fact that both warranties exist to help maintain the quality of the home, plus the fact that some people use one or both terms in an interchangeable manner. 

Here are the significant differences between a home builder warranty and a home warranty:

• Where It Applies: Newly built houses and major home renovations typically come with builder warranties. In contrast, home warranties can apply to existing (and not under construction) homeowner properties.
• What It Covers: Broadly speaking, builder warranties cover major structural and installation problems due to poor quality materials and/or workmanship. Home warranties, on the other hand, are more likely to cover household utility systems and appliances.  
• Who Provides It: Contractors and builders provide builder warranties. Home warranties are usually purchased by homeowners from warranty companies.

It’s important to note here that one cannot replace the other. As a builder, you should remind your clients that your new home builder warranty is not the same as an appliance home warranty.

What Does a Home Builder Warranty Cover?

A typical home builder warranty will at the very least provide coverage for defects due to improper workmanship and/or poor materials used during construction. Some may only promise warranty coverage for instances where there are major problems to key parts of the structure, usually foundations and load-bearing walls.

Most builder warranties will follow a 1-2-10 year format, with the numbers referring to different warranty coverage periods for separate parts of a home. Here’s an example of how a 10-year new home warranty is typically segmented: one year for workmanship and material defects, two years for selected household utility system installation problems, and 10 years for structural issues.

Workmanship and Material Coverage

This coverage includes components such as doors, windows, drywall and paint jobs. Major outdoor renovations may have exterior stucco and siding covered, as well. However, this doesn’t mean that a home builder warranty covers all damage to these parts.

Typically, only damage due to manufacturing or construction defects should be handled through repairing or replacing. For example, a noticeable crack in drywall may be covered, but not a hole deliberately punched into it by the homeowner which would not be covered. 

Selected Household Mechanical Systems Coverage

This includes portions of the HVAC, plumbing and electrical systems.  

Builder warranties will often have an exhaustive list of exclusions under this, and other section(s). These are for the protection of the builder, as you are only liable for defects caused by your work and materials you used. 

Problems due to homeowners’ negligence or intentional acts should not be covered by your home builder warranty.

Major Structural Elements Coverage

Apart from load-bearing walls and foundations, other elements that could be included here are arches, beams, columns, and footings. 

Significant problems to an overall structure can cause a safety issue, so it makes sense that this portion would have the longest coverage period. As a contractor, you benefit from this, too. You don’t want to be known for building unsafe houses that you refuse to stand behind.

Unique Coverage

In addition to the more standard warranty, Residential Warranty Company, LLC also offers a unique warranty called a Customized State Warranty (CSW) which is specially crafted to meet each state’s statues regarding new home warranties. With this warranty, the insurer covers warranted structural defects from day one throughout the entire term of the warranty, limiting the builder’s liability even more. 

Are You a Contractor Searching for a Hassle-Free Way to Handle Your Builder Warranties? 

Worrying about providing a satisfactory home builder warranty can take you away from what you are supposed to be doing for your buyers. Focus on building and renovating, instead of painstakingly negotiating a legally compliant 10-year new home warranty for each new construction project.

Residential Warranty Company, LLC provides builder warranty options for contractors based all over the United States. Get a builders home warranty quote today!