Step 8: What Does a New Home Warranty Cover?

When everything is so shiny and new, it might seem unimaginable that anything could go wrong with your new house. You hand-selected everything from the roof shingles to the flooring. Hours went into choosing the crown molding, the countertops, and the decorative tiles on the bathroom floor. For the past several months to a year, you’ve invested time and money into this build. Your house is a major investment, so make sure it’s protected.

A builder’s warranty is an essential part of any new construction. It covers the permanent parts of your home, like the foundation, plumbing, and electrical work. Before signing a builder’s sales contract, you should know what the warranty includes, how to file a claim, and the process for resolving disputes between you and the builder.

While some home warranties are backed by the builder, some are purchased from third-party independent companies. According to the Federal Trade Commission (FTC), builders are required to buy third-party warranties in order to protect buyers of newly built homes with FHA or VA loans. The FTC also warns that warranties for newly built houses offer limited coverage, so it’s important to know what is included in yours.

What Is a Builder’s Warranty?

Unlike a home warranty, which you purchase on your own to cover major appliances and the HVAC system, a builder’s warranty covers the construction and the materials used. It’s usually backed by the builder or is purchased by the builder from an independent company. Most newly built homes come with a builder’s warranty, which is also called a limited warranty. This is usually outlined in your sales contract or in a separate document.

The length of coverage varies. For example, the siding, doors, and drywall may be covered for the first year, while the plumbing and electrical systems might be covered for two years. You may be protected for up to 10 years for any major structural defects. This coverage is for significant issues, such as a roof that could collapse. Load-bearing walls, framing, and the foundation are also parts of the home that fall under the structural category.

Warranties are transferable for a certain amount of time if the house is sold. It’s worth mentioning that warranties for newly built homes usually don’t cover temporary lodging if the homeowners must move while repairs are made.

What Does a Builder’s Warranty Cover?

What your warranty covers will differ depending on your builder. Some things that might be covered include:

  • Concrete foundations and floors
  • Heating and cooling
  • Septic system
  • Electrical work and plumbing
  • Roofing, siding, and shingles
  • Insulation, thermal and moisture covering
  • Waterproofing
  • Doors and windows
  • Carpentry
  • Dry basement
  • Landscaping
  • Garage doors

What Isn’t Covered by a Builder’s Warranty?

What isn’t covered is almost as important as what is covered. Most builder’s warranties don’t include:

  • Home appliances, like the stove, refrigerator, and dishwasher (these might be covered by their own manufacturer’s warranty or your home warranty)
  • Normal wear and tear
  • Fading of paint
  • Defects on problems caused by work done by the homeowner or other contractors after the builder’s work is complete
  • Weather-related damage (this might be covered by your homeowner’s insurance)
  • Insect damage
  • Renovations to bring out-of-code systems into compliance
  • Damage caused by the homeowner’s misuse or lack of adequate care (such as not venting properly and causing dampness or condensation, not cleaning the gutters, or not addressing a pest problem)

According to the FTC, builder’s warranties typically don’t cover small cracks in brick, tile, cement, or drywall and any other components of the home that are covered by a manufacturer’s warranty.

Some defects are difficult to spot, so consider adding a caveat to your sales contract that will allow you to get your house inspected before the warranty expiration date. This lets a professional have a thorough look at your house and its workmanship, and they can flag any issues the builder needs to correct while the house is still under warranty.

The builder’s warranty might already include this feature, but make sure a quality control inspector (provided and paid for by the builder) shows up within the first year to conduct an inspection. Mark warranty end dates in your calendar and set reminders so you don’t overlook this.

How Do I Make a Warranty Claim?

If you find a defect in your new home, check your warranty or sales contract. Make sure the issue is covered and that you are still within the warranty’s timeframe. Your warranty should provide detailed instructions on how to file your claim, either by filing your request for repair in writing or by calling a general hotline. If the defect requires an emergency fix, could cause bodily harm, or might lead to damage in other parts of the home, you’ll want to contact the builder as soon as possible.

According to the FTC, you should submit your request in writing and ask for a return receipt, even if a phone number is provided. This way, you have proof of correspondence with the company. Take notes during your phone call and include who you spoke to, specific dates and times, and what was discussed. While the claims process is usually smooth, disputes could arise, so make sure you have everything in writing.

Your builder or the third-party company providing the warranty may want to investigate your claim to determine next steps, especially if it’s a major defect. Don’t hire a repairman to make repairs until you get approval. In some cases, the builder will provide the repair or replacement. They may also offer you cash to pay for the repairs. Calling an outside contractor before any decisions are made could void your warranty.

What Should I Do If There’s a Dispute?

Having a builder’s warranty and making a claim should be a fairly straightforward and simple process. But what happens if you see a defect, but the builder doesn’t? Or, what if the builder makes the repair, but you don’t think the repair fixed the issue?

Most warranties for newly built homes call for mediation for disputed claims, followed by a mandatory binding arbitration, according to the FTC. When you go through mediation, a neutral third party will help you and the builder discuss the issue and come to an agreement.

If the mediation isn’t successful, you can submit your complaint to an expert or a panel of experts through the process of arbitration. There will be a hearing, and the expert or experts will evaluate both sides, then provide a final decision. It’s called “binding arbitration” because this decision is final — it can’t be appealed, according to most warranties. Most of the time, homeowners can choose an arbitrator from a list approved by the builder.

Arbitration is less formal than a traditional court trial, but you may still have to attend hearings, hire legal representation, obtain documents, and present evidence. While it’s cheaper, it could still end up costing you thousands of dollars.

If you have an FHA or VA loan, you’ll be able to choose between arbitration and going to court. Check to see who covers arbitration costs. Some builders will offer to pay all arbitration costs to dissuade homeowners from going to court.

What About Unfinished Work?

Some warranties exclude incomplete work in your home. Make sure you look over your new home carefully, both at the pre-closing meeting and during your final walk-through. You can even hire a professional inspector to help you during these final looks at your new house. This is when you’ll create your punch list of items for the builder to repair.

While it’s unlikely, a builder could go out of business or change names once the work comes to an end, which might nullify the warranties. If this happens and you have a major defect on your hands, contact a lawyer for advice on next steps.

You can also check if the manufacturer’s warranty applies, especially when dealing with faulty windows, blinds, or roof shingles. You might be able to argue that the product doesn’t work, but with new construction, the issue is often improper installation.

How Do I Protect My New Home?

You are the proud owner of a shiny, new home, so of course you want to care for it and keep it in top condition for as long as you can. It’s also a huge financial investment that you’ll want to safeguard. Here are some things you can do to make sure your home is protected:

Read your warranty thoroughly. Before signing any contract that refers to warranties and insurance, read it very carefully. Make sure you understand what’s being provided, the time frame, and who is responsible for handling any problems. You want to know exactly how to notify your builder about defects that require repair. If you don’t follow the protocol correctly, you could void your warranty. If you’re unsure about what your contract says, ask your real estate attorney to explain the terms and conditions.

Pay attention to your responsibilities as a homeowner. While a warranty provides a sense of security, homeowners are on the hook for any damage or defects they cause to their home through misuse or negligence. The most common dispute between builders and homeowners is whether the defect was caused by the builder’s negligence during construction or by the homeowner’s misuse. The builder should offer a home orientation session, where they will explain everything you need to know to maintain your home, including how to access water shut-off valves, how to change the air filters, and where to find the home’s fuse box.

Be proactive. Pay attention as you get to know your new home. In the first year, your property will be exposed to different seasons. These seasons could bring unexpected surprises you’ll want to fix right away. For example, in the spring, you might notice the back yard wasn’t graded well and during heavy rain you’re experiencing mudslides. In the winter, you might discover faulty window seals. Once the house has time to settle, you might notice a major structural issue. For example, creaky floors are a common defect tied to structural problems.

Prepare for maintenance and repair costs. While warranties and insurance are great tools to help you protect your property, repairs and maintenance expenses are part of homeownership. Review your homeowner’s insurance policy to make sure it covers as much as possible, from appliances to damage caused by weather. Check your deductible, as well. Even though warranties and insurance help you protect your property, repairs and maintenance will be necessary, even in a new home. Make sure you can cover your deductible and any out-of-pocket expenses by saving money throughout the year.