Builder Home Warranties Vs Home Warranties : Understanding Structural Warranty Programs

Ravindra Ambegaonkar
5 Minutes Read
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    A home builder’s warranty is a must for every newly-built property today. It’s the type of protection that gives homebuyers some invaluable peace of mind. But most importantly, it also protects the interests of the builders. However, it’s important not to mistake a homebuilder’s warranty for home warranty. Those are very different services that can complement but not replace each other.

    What Is a Homebuilder’s Warranty and What Does It Cover?

    Warranties for newly built homes are a type of third-party protection offered to homebuyers, but it’s purchased by the builder. Today, offering this type of warranty isn’t an enforced rule. However, VA and FHA require this coverage to be present for homes purchased with VA or FHA loans.

    Note that the actual coverage of such policies is rather limited. The majority of them cover only structural elements of the new building, as well as materials and workmanship. The plans range from six months to two years, but there are some options that offer protection for ten years. The latter type is usually restricted to covering major structural defects.

    Usually, a homebuilder’s warranty would cover:

    • Foundation and floors
    • Carpentry
    • Waterproofing
    • Thermal and moisture cover
    • Clapboard and shingles
    • Insulation
    • Roofing and siding
    • Glass
    • Doors and windows
    • Garage doors
    • Landscaping
    • Plumbing
    • Electrical wiring
    • Septic system
    • Heating and cooling systems
    • Paint

    It’s important to note that builder’s home warranties usually do not cover damages caused by:

    • Any works conducted by homeowners or any contractors they hire
    • Expansion and shrinkage of the building (cracking of joints included)
    • Weather and natural disasters
    • Natural fading of paint and degradation of other materials (if happening at a normal rate)
    • Pest and insect damage
    • Dampness and condensation-related problems (if the cause is inadequate ventilation that resulted from homeowner’s inability to maintain the property)

    The exact list varies depending on the provider of the warranty, but all of them have one main purpose, which is to protect the builder from lawsuits should anything go wrong with the newly built house.

    And that’s the most important difference between a homebuilder’s warranty and a home warranty. The latter is oriented toward consumers, while a homebuilder’s policy is a B2B service.

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    Yes, it does protect the new homeowner’s interests as well. However, the type of coverage mostly focuses on reducing the risks to the contractor. That’s the main reason why every builder should be using warranties offered by companies like StrucSure.

    What Exactly Is a Home Warranty and Why Does It Matter?

    Home Warranty image

    A homeowner who wants to avoid paying huge repair bills should some important system or appliance break down inside their house can use a home warranty service agreement. This kind of service will cost about $400-600 a year and will cover the items that a homebuilder’s warranty does not. Those items are mostly home appliances, ranging from ceiling fans to fridges. But many plans today also offer optional coverage for pools and spas.

    The confusing thing is that home warranties also cover essential home systems, such as plumbing and electrical. And this is where the distinction between the B2B nature of the homebuilder’s warranty and the B2C focus of a home warranty matters most. Should there come any dispute with the third-party warranty provider, a home warranty would prioritize the consumer, meaning the homeowner.

    Home warranty plans are also much more extensive and flexible in their coverage. This means that they will protect you not only in case of the damage that resulted from the building’s construction defects. A home warranty plan differs from home owner’s insurance in a similar way, as the insurance only covers you in case of damage caused by a predetermined list of external factors.

    However, home warranties are also rather poorly regulated. This means that one always needs to study the plan’s terms and conditions very closely to understand exactly what’s included in the coverage.

    What Kind of Warranty Should Builders Offer?

    Businesses that construct and sell houses right away should consider offering both types of warranties to make sure their properties are filled up faster. According to statistics, properties with home warranties sell out faster by about 11 days.

    Including a builder’s home warranty in the package is a must because it’s the builder who gets to avoid hefty lawsuits should it ever be used. However, a home warranty is a service that can be used specifically for the purpose of attracting buyers. It’s not uncommon for construction businesses to partner up with home warranty providers to offer some great package deals to new homeowners.

    However, some such partnerships end up in a scandal. Therefore, it’s essential for the builder to choose the company they will work with carefully. After all, their reputation will be riding on it.

    Does this mean that a home builder must deal with two different warranty companies?

    It’s true that there are third-party warranty providers that specialize in structural warranties. They offer service packages geared specifically toward construction businesses, which can be highly beneficial. However, they ware also sure to be rather limited, just like the builder’s coverage they offer.

    However, some of the leading home warranty companies today also offer this kind of service. More progressive and innovative providers, like 2-10 Home Warranty, offer service packages for consumers and builders both. And if they are flexible, one might be able to negotiate a custom plan that will provide the most extensive coverage at the best price.

    As the plans vary greatly, it’s prudent for homeowners to do a thorough research of the warranties they are offered with the property. The more savvy among them would know that and would, no doubt, appreciate if the home builder provides them with all the relevant information right away.

    The main concern for the consumer is, of course, the coverage. They need to understand exactly what the builder’s warranty and the home warranty cover for this specific property. They also need to know what the limits of these are and where they should turn to resolve any possible disputes. A builder that wants to establish a good reputation would make sure that the plans on offer cover an extensive list of possible breakdown causes and have high payout limits.

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