Builder Warranties: Helping Your Clients Stay Informed

Your clients will be interested in the home warranty that’s offered to them when they build their new home, so it’s important you understand builder warranties.

What you need to know about your client’s builder warranty.

A new home warranty is one of the benefits that buyers get when they build a new home and helps cover the repair or replacement of structural defects.

As you guide your clients through the process of buying a newly built home, you’ll be the guru of all things warranty-related, so it will be important for you to know the odds and ends of this contract so you can clearly relay that information to your clients.

With this in mind, here’s what you need to know about builder warranties:

One of the many advantages of buying new is that builder warranties generally come with the house. Let’s put this advantage of buying new in perspective: in one 2021 study, the Census Bureau reported More than half of owners of older homes spent less than 1% of their home’s value annually on home improvement and maintenance.  New owners spent more than longtime owners: a median of 1.5% of the home’s value, compared to 0.6%.

With the average home price in 2012 in the $350,000 range, that means at least $3,500 went to maintaining plumbing, electrical components and other home-related maintenance. Your clients will pay much less than the average household in maintenance costs because new homes are much more energy efficient and engineered better than their predecessors and a new home warranty protects their new investment.

Keep in mind that a new home warranty may not cover everything and certain elements of the contract will expire at different times. If you dig through your client’s warranty contract, you’ll probably see what is called a “1-2-10” warranty. It safeguards the homeowner for one year from faulty workmanship or defective materials, two years from any systems (HVAC, electrical, plumbing, etc.) that were not installed properly and 10 years from major structural defects. Knowing this doesn’t mean your detective work is done.

You’ll need to ask the builder questions such as:

  • What does faulty workmanship and defective materials entail?
  • Are there any appliances that are not covered by the two-year warranty?
  • How will you determine if there is a structural defect versus damage that was not the builder’s fault?

Making sure you know how each component of the warranty applies to your client’s home will help them down the line.

Getting the full picture of a builder’s coverage policy may require you to reach out to the builder for additional details. It’s up to agents to ask tough questions for their clients, says Roman Lopez, an Austin, Texas, Keller Williams real estate agent. Asking these questions means that you will fully understand what’s included, helping to reassure your clients. This could be something that helps clients choose a newly built home. “Your clients may find that having the warranty in place is a must and decide to go with a new build over a resale,” says Lopez.

To be as thorough as possible with helping your clients, explain to them the difference between a builder warranty, a third-party home warranty and home insurance, which is different than a warranty.

If their home is in a flood zone, for instance, it’s important that clients know their builder warranty doesn’t cover foundational damage caused by severe weather. “Homeowners should always carry their own insurance policy with their builder or home warranty to cover not only theft, but damage by severe weather and also flood insurance if they are in a flood zone,” says Linda Welsh, an agent in Austin, Texas.

In the end, it’s all about keeping your clients informed so they have the best homebuying experience possible. Keeping up-to-date with your builder’s warranty policy will ensure the buyer is aware of what kind of protection they have and help build confidence in you and the builder’s brands.

About the author 

Dan Chapman

As a content intern for NewHomeSource Professional, Dan Chapman writes a variety of articles on topics about home building, real estate, and house and home.

He's graduating from the University of Texas at Austin in December 2014 with a degree in English and a minor in Business Foundations.

Dan interned with Houston architectural firm Kirksey, where he helped edit Kirksey Magazine.

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