What Is a New Home Warranty? Is It Different From a Home Warranty?

PUBLISHED: DEC , 16 2021 • 6 MINS READ

After an expensive purchase like a home, you don’t want to shell out large amounts of money for repairs within the first decade at least. The good news is that a newly constructed home usually comes with a builder’s warranty, also known as a new construction warranty or a new home warranty. It covers the workmanship and materials used in the home’s permanent fixtures and structural elements.

Ensure that your new home comes with a builder’s warranty from a reputable service provider. However, there could be some problems unexpectedly cropping up after moving in, like electrical system troubles or a home appliance malfunctioning – things that aren’t cheap to fix. A home warranty is a cost-effective option to deal with such issues because the builder’s warranty may not cover them.

What are these warranties exactly?

The term new home warranty gets thrown around by builders, real estate professionals, and home warranty companies for two different policies.

According to the Federal Trade Commission, a home warranty is a service contract for inexpensive repairs and replacements on aging home systems and appliances breaking down due to normal wear and tear.

FTC uses the term builder’s warranty or structural warranty for plans that consist of:

One-year warranty against workmanship and faulty materials used in construction like doors, drywall, paint, etc.
Two-year warranty for built-in home systems like HVAC, electrical, plumbing, etc.
Ten-year warranty for qualified structural defects that put the homeowner’s life at risk – problems with load-bearing elements, roof systems, garages, etc.

We will use the terms new home warranty or construction warranty for this article to refer to structural warranties unless stated otherwise.

Do all new-build houses come with a warranty?

Most newly built homes come with new home warranties because most states have made laws mandating that builders provide them to home buyers at the time of sale. They may offer it directly by creating a contract with the new home buyer or through a third-party company that sells new home warranties. The FHA has made the one-year component of the new home warranty compulsory.

Your builder should hand you the house with a new home warranty when starting the closing process. The warranty provides coverage for ten years, on the structural components, as mentioned.

What does a new home warranty cover?

A new home warranty has 1, 2, and 10-year sub-plans.

For one year, the coverage extends over workmanship and materials, where defects will be repaired, replaced, or paid for, in covered components that cause not to meet the performance standards. The covered parts or components are:

Site work- Grading and Drainage
Foundation and concrete
Masonry- unit, stucco, and cement plaster
Carpentry and framing- plywood, joists, and finish
Thermal and moisture proofing
Door and windows- including glass, glazing, and weatherstripping
Various finishes
Fireplaces
Built-in sauna and steam bath units
Cabinets and vanities
Plumbing system and water supply
HVAC system
Electrical systems & components like switches and receptacles

The warranty provides guarantee and building warranty for two years on defects in the following:

Septic system
Plumbing system
Water Supply
Electrical system
HVAC system

Finally, there are ten years of coverage for defects in the major load-bearing items, basically, items that count as major structural defects:

Footings and foundation systems
Beams
Headers
Girders
Load-bearing walls and partitions
Lintels
Columns (non-cosmetic)
Roof framing systems
Floor framing systems
Masonry arches

What does a new home warranty exclude?

A new home warranty is an express limited warranty. It will get the builder or contractor to perform the services or provide payment if they refuse. It does not cover issues that aren’t relevant to the performance of the items or are a part of normal wear and tear.

It does not cover shrinkage cracks, cracks developing from improper loading. Deterioration in concrete work due to damage from salt, chemicals, or mechanical implements wouldn’t be covered either.

Like home warranties, maintenance is an essential condition for new construction warranties. Patchy caulking, siding falling off due to neglect and heavy objects, natural weathering of nails, waterproofing leaks due to improper grades being installed, etc. are things the plan won’t cover.

Always read the implied warranties contract in detail to know what is not covered. It will help you figure out how to plan for contingencies and ways to minimize the cost of solving impending problems.

New Construction Warranty Vs. Home Warranty

It can be easy to mix up new construction warranties with home warranties. The two plans do overlap a little for new homes. Since a new construction warranty does cover many aspects of critical home systems for up to 2 years, new homeowners may be better off getting appliance-focused plans when moving into a new home.

This table summarizes some key differences between the two kinds of contracts.

New Construction Warranty	Home Warranty
Covers structural damage for ten years and workmanship and materials for 1-2 years Covers problems due to performance standards not being met It does not cover home appliances at all, and home systems after two years Provided by the builder/contractor/company on their behalf Legally mandatory in most states	Covers repairs and replacements of home systems and appliances for one year or more Covers breakdowns due to normal wear and tear Does not cover foundation, waterproofing, structural components of the home, etc. Provided by realtors/sellers during a real estate deal Not mandatory; voluntary purchase

Home warranty would make a good complimentary plan for new homeowners who want to minimize maintenance and repair costs as much as possible. It covers appliances like refrigerators, washers & dryers, microwaves, dishwashers, pool and spas, rekeying, limited roof leaks, etc. It fills the gap of the builder’s warranty by covering items like plumbing stoppages, pest control, tune-ups, etc.

Another alternative is to get an extended warranty if you have very few appliances you want to have covered.

The best time to buy a home warranty plan for systems coverage is after the manufacturers’ warranties expire and the 2-year component of the builder’s warranty expires. Since the home warranty is voided when there is overlapping coverage, you’ll get the best out of the policy once it is the only one extending over an item.

Costs

The ten-year construction or structural warranty varies widely from state to state. Generally, it is less than 0.5% of the home’s total purchase price, including the land. Since the building dimensions, plans, land quality, etc., factor into the materials and workmanship of the construction, quotes are highly personalized by the builder. Out-of-pocket repairs can go over $40,000 quickly.

If you are considering adding a home warranty to the mix for aging home appliances, it costs on average $25-60 monthly as premium and $50-150 as deductible when a trade service request is filed. In comparison, breakdowns can range from $100-$3000 to fix, not considering the cost of replacements.

How and when to use the new home warranty?

It’s tempting to assume that your new home will look perfect and not show up with any defects. If the build quality is excellent, you may never need to use your builder’s warranty.

However, many homeowners have been unpleasantly surprised by defects in a newly purchased home. If you start seeing cracks in the walls or foundation, roof tiles falling off, water seeping into the basement, etc., it is time to call your builder and file a claim.

If the builder has purchased a third-party warranty, you’ll have to get in touch with the company. Always ensure that you have the contact details before taking possession of the property.

When the home systems or appliances experience problems no longer covered by your construction warranty, you can call your home warranty company’s customer service department to file a claim. They send over repair technicians to diagnose and recommend a course of action. You will get the service carried out or a reimbursement accordingly.

Top Home Warranty Companies

You may not really get to choose how your builder extends a warranty over your new home. But, among the top home warranty companies for a newly built home, we recommend the following:

Cinch Home Services

Plans – Appliances Plan, Built-In Systems Plan, Complete Home Plan

✓ Offers Free Water Sensors With Plans

✓ Covers Pre-Existing Conditions

Select Home Warranty

Plans – Bronze Care, Gold Care, Platinum Care

✓ Limited-time free roof coverage available

✓ Extensive contractor network of skilled professionals

2-10 Home Buyers Warranty

Plans – Simply Kitchen, Pinnacle Home, Complete Home, Builder’s Warranty

✓ Offers both structural warranties as a third-party company and home warranties

✓ Member of NHSCA and NAHB

Final Word

Getting a home warranty for a newly constructed home could be a financially prudent discussion. You’ll want the builder to offer a structural warranty, which is why many states have framed new home warranty acts. You can also supplement your home’s financial cover by getting a home warranty plan that fills the gaps left by the home insurance and the structural warranty plans.

You will continue to have the same peace of mind as you do in your first year of homeownership. It also helps after you’ve spent a large amount of money on closing-related costs.

Frequently Asked Questions (FAQs)

Do all newly built homes have a ten-year guarantee?

In states where the law mandates builders to provide warranties on new constructions, the homes will have ten-year guarantees.

How do you tell if your house is poorly built?

It’s difficult for the layman to tell a poorly built house. Some defects are apparent, like improperly placed flashing, roofing, or leaks where they shouldn’t be happening. You shouldn’t see larger-than-hairline cracks on walls, stucco, etc. It is better to have a home inspection if you doubt the build quality.

Does builders’ warranty cover windows?

Builder’s warranty covers certain defects of the windows, like condensation on the glass, double-hung windows not staying in place when closed, and malfunctions against manufacturer specs, but only for a brief period.

What is the New Home Warranty Act?

The New Home Warranty Act is a law enacted by many states to give homeowners remedy against certain defects in a newly constructed home. It states that a new home should be free of defects due to non-compliance with building standards for a year after warranty commencement and up to 6 years from structural defects. Builders are to be notified and given a chance to fix the defects.

Do home warranties cover structural issues?

Regular home warranties don’t cover structural defects.

Is the roof included in the structural warranty?

The structural warranty would include major structural defects affecting the roof integrity. Most structural warranties cover roof framing systems.

What is a 2-10 builders warranty?

The 2-10 Builders Warranty is a product of 2-10 Home Buyer’s Warranty, a company offering home warranties.

Is the builder responsible for foundation problems?

As long as the structural warranty is in operation, a builder is responsible for foundation problems if proved to be due to poor construction techniques.

What voids the builder’s warranty?

There are a few different circumstances that can void a builder’s warranty. We recommend going through your contract in detail to ensure that you understand them all. Generally, hiring a third-party contractor for work around the home, not approved by the builder, DIYing repairs, using non-water resistant laminate in the bathroom, etc., can void the warranty.

Is a leaking roof a structural defect?

A leaking roof may not always be a structural defect. It could also happen if any plumbing near the roof leaks and the water passes nearby.

Are new home builder warranties transferable?

Yes, new home warranties are transferable to a new homeowner for the remainder of the warranty period. Home warranty service contracts for home appliances are also transferable to new homeowners.

Should I get a home inspector for new construction with a 1-year warranty?

It is advisable to have a home inspector look over any new home purchase you intend to make. Even if the property has a warranty, the home inspector may be able to tell whether the items would be eligible if you filed claims. Most construction warranties exclude maintenance-related issues. A home inspector would be able to diagnose such occurrences.

What to do if the builder can’t be located?

If you can’t locate the builder or they refuse to honor the warranty, check the procedures for filing a claim. Many structural warranties have a surety clause where a third-party company pays compensation in such cases. You may have to contact a lawyer if you can’t find anyone responding to your communication attempts. If there is a clear breach of contract, you should contact an attorney. Many home warranty companies prefer to go for arbitration to settle disputes.

What happens if a builder does not honor the warranty?

That is a distressing situation because a structural defect is a costly problem to fix. If your builder refuses to honor any warranty clause, the contract may offer mediation or arbitration option. Failing that, you should consult an attorney and decide the course of action.

How long is a home warranty term?

A home warranty for home appliance repairs lasts for a year. If you get multi-year contracts, they go on for a longer duration.

Who pays for the builder’s warranty?

Since a Builder’s warranty is offered along with a newly constructed home, it should be paid for by the builder or project contractor. A homeowner shouldn’t have to pay within the contractual limits.