What is a homebuilders warranty?

What does a builders warranty cover?

A warranty offered by a homebuilder protects you from paying for costly repairs for work that wasn’t done correctly or defective materials. Most newly constructed homes come with a new home warranty that the builder funds themselves or through a third-party warranty company. The builder might incorporate the cost into the price of the home, but you won’t have any monthly costs.

The list of items a homebuilders warranty covers is extensive. Policies differ, but general coverage includes:

A foundation repair can cost up to $25,000.

• Major structural defects: Components that affect the safety of the home, like load-bearing walls, roof framing, masonry arches, columns and floor systems, are usually included. The warranty also covers the foundation. Structural warranties are one of the most important to have, because the elements they cover are the most expensive to fix and can create an unsafe living environment when in bad condition.
• Exterior components: The warranty covers many items on the exterior of the house, like siding, shingle roofing, windows, garage doors and sometimes paint.
• Home systems: The major systems in your home are likely covered, including HVAC units, ductwork, plumbing and the electrical system.
• Workmanship: If the workmanship in the construction of the home is below industry standards, the warranty might cover defects. For example, if the builder installs windows incorrectly and they let in moisture, the workmanship part of your homebuilders warranty should cover replacement.

Additional items covered by a new-construction warranty include:

• Windows
• Doors
• Trim
• Floors
• Drywall
• Glass
• Septic system
• Landscaping
• Carpentry
• Insulation

Every warranty is different, and your builder will give you a detailed list of what's covered and how long the coverage lasts.

How long does a new-construction warranty last?

The amount of time a new-construction warranty lasts depends on the contract and usually varies for different components.

Here are examples of common timelines for warranty coverage:

• One year of limited warranty coverage on workmanship, materials and other components not covered by a manufacturer warranty
• Two years of limited warranty coverage on major systems like HVAC, plumbing and electrical
• 10 years of limited warranty coverage for major structural defects like foundation problems

Homebuilders warranties are considered limited because of certain common stipulations, like no coverage for damage due to homeowner neglect or weather.

Builders home warranty vs. a typical homeowners warranty

A builders home warranty is different from a typical homeowners warranty because it's included by the builder. Homeowners obtain a traditional home warranty via a seller or by contacting a warranty company and paying a monthly fee and a service fee when repairs are necessary.

There are other differences between a builders warranty and a typical home warranty.

• Warranty vs. service contract: A homebuilders warranty is more like a traditional warranty, covering work or materials specifically completed by or used by the contractor in the building of the home. A home warranty is more like a service contract. It generally covers systems and appliances that break down from normal wear and tear and are no longer under manufacturer warranty.
• Flexibility: A homebuilders warranty has very specific terms and no options for customization. With a home warranty contract, you can personalize a plan’s coverage, service call fee amount and other details.

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Pros and cons of a builders warranty

Homebuilders warranties have advantages and disadvantages for owners of newly constructed and newly remodeled properties.

Advantages of a builders warranty:

• No cost to you: A new-construction builder includes a warranty in the cost of the home purchase. There is no monthly cost and no deductible if you make a claim — this is a big difference between a homebuilders warranty and a home warranty.
• Coverage of expensive repairs: The cost of one major repair can wipe out a savings account. A foundation repair, for example, can cost up to $25,000. A homebuilders warranty gives peace of mind that your home was built well — and that if there are problems you won’t be financially responsible.

Disadvantages of a builders warranty:

• Coverage restrictions: While the warranty does cover many items, there are restrictions. For example, damage to the home caused by natural disasters, outside contractors or homeowner neglect is excluded from coverage.
• Excluded items: Appliances can break down. A builder warranty doesn’t cover appliances or other items that are backed by a manufacturer's warranty.
• Limited coverage time: The coverage only lasts for a period set by the builder. After that time, the owner does not have the same financial protection and likely has to pay out of pocket for repairs.

Bottom line

Buying a newly built home can be stressful, but a builders warranty relieves some of the worry about a costly structural issue. Because most homebuilders include the warranty with a purchase of a home, you don’t need to opt in to coverage.

Still, it makes sense to ask the builder about the warranty and look over the finer points of the policy so you know what to expect and how to file a claim. Keep the policy on hand in case there are any workmanship or quality issues with your new home.

Remember that a home warranty — separate from a builders warranty — may also come in handy for home appliances and systems once they are no longer covered by the builder or manufacturer.

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