What Is a Homebuilders Warranty?

Homebuilders warranty explained

A warranty offered by a homebuilder protects you from paying repairs costs for work that wasn’t done correctly or for 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.

» LEARN MORE: Home warranties for new construction

What does a builders warranty cover?

The list of items a homebuilders warranty covers is extensive. Here’s a quick overview:

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

Policies differ, but general coverage includes:

• 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.

What does a builders warranty not cover?

New-construction warranties cover much of the house, but there are exclusions. Homebuilders warranties will not cover:

• Home appliances
• Normal wear and tear
• Anything covered by a manufacturer’s warranty
• Damage resulting from homeowner neglect
• Weather-related damages
• Work done by an outside contractor or the homeowner
• Shrinkage and expansion of the home
• Monetary expenses lost due to the defect, like living out of the home during repairs

The contract will detail items not included and any stipulations. Be sure to read over the language carefully so you know what’s covered and what’s not.

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.

Filing a claim with a homebuilders warranty

If you discover a defect or issue covered by your homebuilders warranty, the claims process generally follows these steps:

1. Document the issue: Take detailed notes and photographs of the defect. Note the date when you first noticed the problem and keep any related receipts or records.
2. Review your warranty: Double-check your warranty documents to confirm the issue is covered and to find any instructions about filing a claim.
3. Notify the builder or warranty provider: Contact your builder or the third-party warranty company promptly. Provide written notice of the problem, including all relevant documentation.
4. Schedule an inspection: The builder or warranty provider will often schedule an inspection to verify the issue and assess the damage.
5. Approval or denial: If the claim is approved, the builder or designated contractor will complete the repair. If it is denied, the homeowner can dispute the decision.

If your claim is disputed, here’s how it’s generally handled.

• Mediation: A neutral third party helps both sides discuss the claim and try to reach a mutual agreement.
• Arbitration: If mediation fails, arbitration is typically required by the warranty. An arbitrator hears both sides and makes a binding decision.
• Litigation: Rarely, and usually only if arbitration is not mandated, a homeowner may take the case to court. This option is typically more time-consuming and expensive.

It's important to follow all timelines and procedures outlined in your warranty agreement when filing a claim or dispute.

Your rights under a homebuilders warranty

Understanding your rights can help you advocate for repairs and hold your builder accountable when issues arise. Even if they are not explicitly written into your contract, most states recognize certain implied warranties in new construction. 

These typically include habitability, meaning the home must be safe to live in and meet basic living standards such as structural integrity, weatherproofing and functioning essential systems, and workmanship, meaning construction should meet reasonable industry standards and be free from defects caused by poor installation or substandard work.

State laws often also provide additional protections beyond the written warranty. These may include minimum coverage periods, required disclosures and consumer protections against unfair practices. In some cases, homeowners may be able to take legal action if a builder fails to address covered defects. Because laws vary by state, it’s important to review local requirements or consult a real estate attorney if you’re unsure about your rights.

Builders are generally expected to honor the terms of the written warranty, address covered defects within a reasonable time frame, perform repairs using qualified professionals and follow local building codes and regulations. If they fail to meet these obligations, it may lead to disputes or legal action.

If a builder does not resolve a valid claim, you may need to escalate the issue. Start by documenting the problem and communicating in writing. From there, you can request mediation if it’s available, move to arbitration if it’s required by the warranty and consider legal action if other options fail and your agreement allows it. Escalation is usually a last resort, but it may be necessary if the builder does not fulfill their responsibilities.

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.

FAQ

Is a homebuilders warranty worth it?

A homebuilders warranty is usually worth it because it protects against costly structural and construction defects during the first years of homeownership. Since the warranty is typically included in the purchase price, it offers added peace of mind without ongoing monthly costs.

However, coverage is limited in scope and duration, and not all issues are included. Homeowners are still responsible for maintenance, appliances and damage caused by neglect or external factors. Because of these limitations, it’s important to review the warranty terms carefully so you understand what is and isn’t covered.

For many homeowners, a builders warranty is a valuable safety net during the first years in a 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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