Homeowners’ Warranty Program (HOW)

Definition

The Homeowners’ Warranty Program (HOW) is a private insurance plan intended to protect buyers of newly constructed homes from defects that may arise in the structure or mechanical systems of the property. This program kicks in when a builder is an active participant in the HOW scheme, providing buyers with peace of mind through added assurance that any construction-based faults will be addressed without additional costs.

Detailed Explanation

The HOW provides a guarantee against various construction deficiencies identified within a standard coverage term, typically covering structural integrity as well as critical mechanical systems like plumbing, electrical, and HVAC systems. The main features include:

Structural Coverage: Protection against major structural defects such as foundational cracks, roof failures, and issues with load-bearing walls.
Mechanical Coverage: Shielding homeowners from faults in essential home systems such as heating, air conditioning, plumbing, and electrical installations.
Time-Bound Protection: A predefined coverage period, generally spanning a few years post-construction, during which the homebuyer can claim repairs or replacements under the warranty.

The quality and types of coverage can vary depending on the specific program and the builder’s agreement with the warranty provider.

Examples

Example 1

Abel purchases a new home from XYZ Builders. XYZ Builders participates in the HOW program, meaning Abel receives documentation ensuring coverage for structural and mechanical faults. In the first year, Abel notices a crack in the basement wall. He contacts the warranty provider, who promptly sends a contractor to fix the issue at no additional cost.

Example 2

Maria buys a newly built condominium in a large complex. The builder is part of the Homeowners’ Warranty Program. Six months after moving in, Maria’s furnace stops working. She calls the HOW program, and they arrange for the repair, ensuring she doesn’t have to pay for the defective installation.

Frequently Asked Questions

1. What does the Homeowners’ Warranty Program typically cover?

The HOW program typically covers major structural defects, as well as faults in mechanical systems such as plumbing, electrical, and HVAC installations.

2. How long does the coverage last under the HOW program?

Coverage terms may vary, but they generally range from one to several years, depending on the agreement and specific components involved.

3. Do all builders participate in the HOW program?

No, participation in the HOW program is not mandatory for builders. It is an optional scheme that some builders opt into to provide additional assurances to buyers.

4. What should I do if I discover a potential defect covered by the HOW program?

You should contact the warranty provider immediately to report the issue and initiate the claims process. Buy documenting the defect with pictures and descriptions can help efficiently resolve the claim.

5. Are there any exclusions in the HOW program coverage?

Yes, like all insurance programs, HOW might have exclusions, which can include natural wear and tear, maintenance issues, or non-covered cosmetic damages.

Builder’s Warranty

A guarantee provided by the builder to cover any potential construction-related issues within a stipulated time frame post-purchase.

Structural Warranty

A type of warranty that specifically covers defects in the structural components of a building, including foundations, walls, and roofs.

Mechanical Systems Warranty

Protection against malfunctions and defects in the mechanical systems of a home, such as heating, ventilation, air conditioning (HVAC), plumbing, and electrical systems.

Online Resources

References

“What is a Home Warranty,” Home Buying Institute
“The Importance of Builder’s Warranties,” National Association of Home Builders
“Home Warranty Coverage,” Realtor.com

Suggested Books for Further Studies

“The Home Buyer’s Manual” by Rick Winter
“Home Maintenance For Dummies” by James Carey and Morris Carey
“Residential Building Codes Illustrated: A Guide to Understanding the 2018 International Residential Code” by Steven R. Winkel and Francis D.K. Ching

Real Estate Basics: Homeowners’ Warranty Program (HOW) Fundamentals Quiz

### What is the main purpose of the Homeowners’ Warranty Program (HOW)? - [x] To protect buyers against structural and mechanical faults in newly constructed homes. - [ ] To provide homeowners insurance against natural disasters. - [ ] To ensure property taxes are minimized. - [ ] To cover remodeling costs of older homes. > **Explanation:** The HOW program is specifically designed to offer protection to new home buyers against defects in the construction or mechanical systems, not for broader insurance needs or tax purposes. ### Who benefits from the HOW program? - [x] Buyers of newly constructed homes. - [ ] Homeowners of pre-existing houses. - [ ] Tenants renting apartments. - [ ] Commercial property investors. > **Explanation:** The HOW program is targeted at those who purchase newly constructed homes, providing them with warranty coverage for construction defects. ### What is NOT a typical coverage under the HOW program? - [ ] Structural defects. - [ ] Mechanical system faults. - [x] Routine maintenance issues. - [ ] Foundation problems. > **Explanation:** Routine maintenance issues are generally excluded from the typical coverage offered by the HOW program, which instead focuses on structural and mechanical defects. ### How should a homeowner initiate a claim under the HOW program? - [ ] Contact a local handyman. - [x] Contact the warranty provider immediately. - [ ] Wait until the warranty period is almost over. - [ ] Repair the issue themselves and keep records. > **Explanation:** Homeowners are advised to contact the warranty provider immediately upon discovering a defect to facilitate timely and appropriate response. ### If a builder participates in the HOW program, what assurance does it provide to the buyer? - [x] Coverage for structural and mechanical faults. - [ ] Complete renovation cost for the property. - [ ] Reduced property taxes for the duration of the coverage. - [ ] Home insurance for any type of property damage. > **Explanation:** Participation in the HOW program ensures buyers that faults in the structural and mechanical aspects of their new home will be covered. ### Is builder participation in the HOW program mandatory? - [ ] Yes - [x] No - [ ] Only in certain states - [ ] Only for homes above a certain price point > **Explanation:** Participation in the HOW program is not mandatory for builders; it is a voluntary scheme that builders can choose to participate in. ### For what duration is the HOW coverage typically provided? - [ ] One month - [ ] Half a year - [x] Several years, depending on the specific warranties provided - [ ] Until the property is sold > **Explanation:** The HOW program usually provides coverage for several years, though the exact duration can vary based on the specific terms of the warranty provided by the builder. ### In Example 1, who is responsible for repairing the structural crack in Abel's basement wall? - [ ] Abel himself - [ ] XYZ Builders - [x] The HOW program warranty provider - [ ] A third-party inspector > **Explanation:** Since Abel's builder participates in the HOW program, the warranty provider is responsible for arranging and covering the repair of the defect. ### If Maria's furnace stops working a half year after moving into her new home, what step should she take according to the HOM program process? - [ ] Purchase a new furnace - [ ] Take no action and endure the issue - [ ] Contact the original contractor directly - [x] Contact the HOW program for repair services > **Explanation:** Maria should contact the HOW program directly to arrange for repair services under the coverage provided by the warranty. ### What aspect of home does the HOW program focus on besides structural coverage? - [ ] Cosmetic updates - [x] Mechanical systems such as plumbing and HVAC - [ ] Landscaping repairs - [ ] Utility cost reductions > **Explanation:** Alongside structural defects, the HOW program covers issues in essential mechanical systems like plumbing, electrical, and HVAC installations.