Most homeowners who move into a newly-built home are thinking about the modern kitchen tile and the color of accent walls, not whether the house is structurally sound. That’s because builders often include a 10-year warranty for major issues to put buyers’ minds at ease.
From the foundation to the roof, new homes are covered against defects, and its new tenants can breathe a little more easily knowing they won’t have to pay for a cracked foundation in five years.
At least that’s what many buyers believe when they sign on the dotted line to be the first names associated with a newly christened address. But builder warranties aren’t always the safety net that many people assume them to be.
Builder warranties often expire incrementally and don’t cover everything for the full term.
What a builder warranty does and doesn’t do
A builder warranty is a homebuilder’s guarantee that a home was built well and is an agreement with homebuyers that the builder will repair certain issues during the first 10 years. Some builders offer warranties for remodeled homes as well.
Builder warranties cover issues relating to how the house was built and the work that went into building the house. This often includes workmanship, installation, construction and materials in certain parts of the house. Examples of often covered items include:
- Structural components such as the foundation and masonry.
- Systems, such as electrical and plumbing.
- Doors and windows.
- Roofing.
- HVAC units and ductwork.
- Drywall and paint.
But a builder warranty doesn’t usually kick in for issues that aren’t the builder’s fault.
For example, a builder’s warranty doesn’t usually cover cosmetic cracks in walls when the foundation shifts during the first few years. This is normal for new houses as the framing and foundation adjust over time. Because it’s unavoidable and not caused by the builder’s work, a builder warranty doesn’t pay to repair this issue.
And a builder warranty doesn’t cover costs relating to home maintenance, damage you cause by living in the home or issues with appliances.
🤓Nerdy Tip
A builder warranty is different from a home warranty. Ensure you understand the difference before filing a claim with your builder.How coverage changes by year
Builder warranties are sometimes called 1-2-10 warranties. This is because they break up what they cover into three categories: workmanship and materials for one year, major systems for two years and structural issues for 10 years.
In other words, a builder warranty doesn’t cover everything for 10 years. It covers less as time goes on.
And this is where a lot of homeowners misunderstand how their builder warranty for their new home works.
One year: materials and workmanship
During the first year, a builder warranty covers the materials that the builder used in the home and how well the home was built. This usually covers improper installation and materials that don’t hold up as well as they should. Examples of issues that fall in this category include:
- Windows or doors.
- Cabinets, countertops and ceramic tiles.
- Hardwood floors.
- Drywall, trim and paint.
- Exterior siding
The first year of coverage starts the day you close on the house and ends when you’ve owned the home for a year. After the first year, the warranty doesn’t cover issues in this category anymore.
Two years: major system defects
For the first two years after you close on a new house, the builder warranty will repair defects or failures of major systems, including plumbing and electrical systems. Some builder warranties cover HVAC systems, but others, such as those offered by the warranty company 2-10 Home Buyers, don’t include them.
Examples of items that are usually warrantied against defects include:
- Supply and waste piping.
- Electrical wiring.
- Ductwork.
This category’s coverage starts when you close on the house and ends when you hit the two-year mark.
Five to 10 years: structural defects
The longest coverage is for structural issues that affect the integrity of the house. This includes:
- Load-bearing walls.
- Beams and columns.
- Foundations.
- Framing for roofs and floors.
- Girders.
- Lintels.
- Masonry arches.
Some states allow builders to cover structural defects for less than 10 years but still have a set length of coverage. For example, Texas requires builders to warranty structural issues for only six years, though some builders offer longer coverage.
If you’re wondering if a home warranty will cover foundation issues after your builder warranty expires, the answer is no. Here’s why.
When a ‘structural defect’ isn’t actually structural
To qualify as a structural defect, an issue has to do more than just look unsightly. It has to threaten the safety of a home, meaning it makes it dangerous for the homeowners to live in the house without repairing the problem. This is a key distinction for what a builder warranty does and doesn’t consider a structural problem.
This requirement means that the 10-year coverage of a builder warranty applies to only load-bearing parts of a house.
But most homeowners can’t see these parts of their homes. What they can see and often think of when discussing structural issues are things like:
- Hairline cracks in the drywall.
- Nail pops (circular spots in sheetrock where nail heads poke through).
- Warped window frames and window leaks.
- Warping or gaps in hardwood floors.
- Cracks in concrete slabs that are less than a quarter of an inch wide.
- Small cracks in brick or mortar.
These issues are often cosmetic or indicate poor installation and so don’t qualify for a structural warranty. They’re usually covered for only one year. This means that if they pop up any time after that first year, you’ll have to pay to repair them on your own.
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When your builder goes out of business
Homebuilders either cover their builder warranties on their own or with a third-party insurer. Who backs your builder warranty can affect your claims process and what happens if your builder goes out of business.
If a builder covers their own warranty, they are responsible for repair costs. That means the builder has to have the money available, which could be tens of thousands of dollars for a single homeowner’s claim.
A builder who uses a third-party insurer pays a premium for an insurance policy. The insurance company pays for any repairs that are made through the builder’s warranties.
The biggest benefit of having a builder warranty that is backed by an insurance company is that your warranty stays active if your builder goes out of business. It also means your builder might be protected against a major financial loss caused by warranty claims that could put them out of business.
Who you file a claim with and what that process looks like depends on how your builder warranty is set up. If you’re unsure, ask your builder before closing on the home or check your paperwork.
When you don’t file a claim the right way
Builder warranties are contracts and have a process that you and your builder have to follow. You’ll submit documentation of the issue you want inspected, which might include photographs. You’ll also need proof that you’ve contacted your builder if you’re submitting a claim to a third-party warranty company.
Builder warranties also require that you submit a claim or documentation before the coverage expires, such as before you pass the one-year mark for a workmanship issue. Submitting the wrong information or a claim past the deadline can lead the warranty company to deny your claim.
Getting the most out of your builder warranty
Maximizing your builder warranty’s coverage means knowing what to do and when to do it.
Before closing on your new home
Do a final walkthrough of your new house. It might be helpful to hire your own inspector who can thoroughly test that everything is working correctly. Take pictures to document anything that the builder needs to correct or fix before you close on the house. This is sometimes called a punch list.
Give the builder a copy of the punch list and ask for a written document that states when each item will be fixed and how the builder will ensure repairs were done properly (known as verification).
At closing
If any repairs haven't been completed by the time you close on your house, tell the builder you want a written agreement that they will correct remaining issues and verify they’re fixed. Skipping this step means any uncorrected issues become part of the builder warranty process, which can be more difficult for homeowners.
Before each coverage category expires
To avoid overlooking issues that need to be repaired before part of your warranty ends, consider scheduling an inspection ahead of the expiration date. This lets you have a professional opinion of your home’s condition and gives you time to file a claim.
To stay ahead of coverage category deadlines, schedule inspections at:
- 11 months after closing for the workmanship and materials category that expires at one year.
- 23 months after closing for the major systems category that expires at two years.
- 60 months after closing for the structural category that expires at six years (yes, a year in advance).
- 96 months after closing (two years in advance) if the structural category is for 10 years.
The structural inspection is meant to be farther out from the warranty’s expiration date than the other inspections because structural repairs can take longer to complete.
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