What’s Covered in a Home Warranty Inspection?

For many people, a home is one of the most expensive purchases they will ever make. It’s crucial to understand the different types of coverage in a home warranty inspection. This includes builder warranties versus home warranties or service contracts. Knowing what they cover, how to make a claim, and how to handle problems that may arise is essential.

Understanding Builder Warranties

A builder warranty comes with new home construction or a remodel. It covers items that are typically a permanent part of the home, such as concrete floors, plumbing, or electrical work. Most newly built homes come with a builder warranty.

On the other hand, an 11-month warranty inspection is really a service contract and costs extra. It typically applies to existing homes and covers replacements and repairs on items like appliances or air conditioning systems. Ultimately, you decide whether or not to buy a home warranty.

Coverage

Many home warranties are backed by the builder. Builders may also purchase warranties from third-party independent companies. In fact, the Federal Housing Authority (FHA) and the Department of Veterans’ Affairs (VA) require builders to buy third-party warranties. This requirement protects buyers of newly built homes with FHA or VA loans, making 11-month warranty inspections even more important.

What’s Covered and For How Long

Builder warranties for newly built homes generally offer limited coverage on workmanship and materials for specific components of the home. This includes windows, heating, ventilation, and air conditioning (HVAC), plumbing, and electrical systems. Warranties usually specify how repairs are made. The length of coverage varies depending on the component of the house.

• One Year: Coverage for workmanship and materials on most components usually expires after the first year. For example, most warranties on new construction cover siding, stucco, doors, trim, drywall, and paint during the first year.

• Two Years: Coverage for HVAC, plumbing, and electrical systems generally lasts two years.

• Ten Years: Some builders provide coverage for up to ten years for “major structural defects.” These defects are often defined as problems that make a home unsafe, putting the owner in danger. For instance, a roof that could collapse is considered a “major structural defect.”

  
  

Situations and Items Typically Not Covered

Most new home warranties don’t cover out-of-pocket expenses resulting from a major construction defect or warranty repair. This includes costs associated with moving out of your home while repairs are made. Builder warranties also usually don’t cover:

• Household appliances

• Small cracks in brick, tile, cement, or drywall

• Components covered under a manufacturer’s warranty

  
  

Service Contracts Explained

A service contract is sometimes referred to as a home warranty or an extended warranty, but service contracts are not warranties. A service contract can help you fix or maintain products like appliances and air conditioning systems for a specific time, similar to a warranty. However, unlike a warranty, service contracts cost extra.

You might find that some service contracts:

• Provide the same coverage you get from the warranty included in the product’s purchase price.

• Cover only part of the product.

• Make it nearly impossible to get repairs when you need them.

  
  

If repairs are inexpensive, you may not benefit from the extra cost of a service contract.

Making a Warranty Claim

If you discover a defect in your home that may be covered by your warranty, follow these steps:

1. Check the warranty to ensure the problem is covered. Pay particular attention to the length of specific types of coverage.

   
   

2. File your claim using the instructions in your warranty. Even if the company provides a hotline for urgent requests, put your request for repair in writing. Consider sending your letter by certified mail and requesting a return receipt. This way, you’ll have proof that the company received your letter and who signed for it. Keep a record of your correspondence and conversations with the company. It's always good to have a record of your dealings with the builder and the warranty company.

   
   

Resolving Problems

Disputes sometimes arise between a homeowner and a builder or third-party warranty company over whether a defect is covered or whether repair work was done properly. Many warranties on new homes offer or require mediation and arbitration for disputed warranty claims.

• In mediation, a neutral third party—a mediator—helps the homeowner and the company resolve the problem by guiding the discussion between both parties. However, it’s up to the homeowner and the company to reach an agreement.

  
  

If mediation fails to resolve the dispute, the homeowner may need to submit any claim to arbitration instead of going to court. In this process, an arbitrator or panel hears each side’s case and then makes a decision or award. Some warranties allow homeowners to choose an arbitrator from a list acceptable to the builder or the third-party warranty company.

• Arbitration is less formal than court, although the homeowner and warranty company may appear at hearings, have legal representation, exchange documents, present evidence, and question each other’s witnesses. Most warranties require that both parties accept 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.

Costs Involved

Arbitration is generally less expensive than going to court. However, you can expect to pay several thousand dollars to take your claim through the process, depending on the complexity of the arbitration. Check your warranties to see what costs you and the builder must pay.

Some companies offer homeowners the choice of arbitration or going to court. Builders will sometimes agree to pay all the costs associated with arbitration to avoid going to court.

For More Information

To learn more about new home warranties, contact your state or local builders’ board. If you have a loan insured by FHA, contact the nearest field office for the U.S. Department of Housing and Urban Development or visit www.hud.gov. If you have a VA loan, contact the nearest VA office or visit www.homeloans.va.gov.

Tagged with: dispute resolution, service contract, warranty, 1 year warranty, 2 Year warranty

Information Shared from: https://www.consumer.ftc.gov/articles/warranties-new-homes

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