New Home Warranties
Protection for your Newly Built Home
New Home Warranty: Description
Warranties for newly built homes promise to repair or replace certain
elements of the home, if necessary, within a certain time. If you
are considering a new home warranty, it is important to understand
what it covers, how to make a claim, and the process for resolving
disputes with the builder or warranty company.
Many home warranties are backed by the builder; others are purchased
by the builder from an independent company that assumes responsibility
for certain claims. For additional protection, home owners may purchase
coverage on their own from third-party warranty companies to supplement
the coverage their builder provides. The Federal Housing Authority
(FHA) and the Department of Veterans’ Affairs (VA) require
builders to purchase a third-party warranty as a way to protect
buyers of new homes with FHA or VA loans.
New Home Warranty: Coverage
New home warranties generally offer limited coverage on workmanship
and materials relating to various components of the home, such as
windows, heating, ventilation and air conditioning (HVAC), plumbing,
and electrical systems for specific periods. A warranty also typically
defines how repairs will be made.
The duration of coverage varies depending on the component of the
house. Coverage is provided for workmanship and materials on most
components during the first year. For example, most warranties on
new construction cover siding and stucco, doors and trim, and drywall
and paint during the first year. Coverage for HVAC, plumbing, and
electrical systems is generally two years. Some builders provide
coverage for up to 10 years for “major structural defects,”
sometimes defined as problems that make a home unsafe and put the
owner in danger. For example, a roof that could collapse is a “major
structural defect.”
Most warranties for newly built homes, however, do not cover expenses
an owner may incur as a consequence of a major construction defect
or warranty repair, like the cost of having to move out of one’s
home while repairs are being made. Nor do they typically cover:
- household appliances
- small cracks in brick, tile, cement or drywall
- components covered under a manufacturer’s warranty
New Home Warranty: Claims
If you have a defect in your home that may be covered by your
warranty, first read the warranty or service contract carefully
to make sure that your problem is covered. Pay particular attention
to the duration of specific types of coverage. Next, file your claim
according to the instructions in your warranty, and put your request
for repair in writing, even if the company provides a hotline for
urgent requests. Request a return receipt, and keep a record of
your correspondence and conversations with the company. Chances
are your claim will be handled to your satisfaction, but if a dispute
arises, it’s good to have a record of your dealings with the
builder and the warranty company.
New Home Warranty: Disputes
Occasionally, a dispute arises between a home owner and a builder
or third-party company over whether a defect is covered or whether
repair work was done properly. Many warranties on newly built homes
provide for mediation of disputed warranty claims, followed by mandatory
binding arbitration. In mediation, a neutral third party —
a mediator — helps the home owner and the company resolve
the problem by facilitating discussion between both parties. It
is up to the home owner and the company to reach an agreement.
If mediation fails to resolve the dispute, it is likely that the
home owner would be required to submit any claim to arbitration,
instead of going to court. In this process, an “arbitrator”
or panel makes a decision or award once the participants presents
their cases. Some warranties allow home owners to pick an arbitrator
from a list acceptable to the builder or the third-party warranty
company.
Arbitration is less formal than court, although the home owner
and warranty company may appear at hearings, have legal representation,
obtain documents from one another, present evidence, and call and
question each other’s witnesses. Most warranties require that
both parties abide by the arbitrator’s decision, without appeal.
If your loan is financed through the FHA or VA and you file a claim
against the third-party warranty company, you can choose between
arbitration or going to court. If you choose arbitration, be aware
that you are bound by the decision.
New Home Warranty: Costs
Although arbitration is generally less expensive than going to
court, home owners can expect to pay up to several thousand dollars
to take their claim through the process, depending on the complexity
of the arbitration. Read your warranties carefully to determine
what arbitration costs or expenses the homeowner is responsible
for and what costs or expenses the builder must pay.
A few companies offer home owners the choice of arbitration or
going to court. Sometimes builders pay all costs associated with
arbitration to encourage a homeowner to agree not to take the matter
to court.
New Home Warranty: More Information
To learn more about warranties on newly built homes, contact your
state or local builders’ board. If you have a loan insured
by FHA, contact the closest U.S.
Department of Housing and Urban Development field office for
more information. If you have a VA loan, you can contact
the nearest VA office.
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
This website is intended to provide a basic understanding of this
information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
Any information received here should be confirmed with the appropriate
government agencies or with an attorney, particularly as it relates
to your individual circumstances. Your use of this website indicates
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