Homeowners’ Warranty Program (HOW)

What is the Homeowners’ Warranty Program (HOW)?

The Homeowners’ Warranty Program (HOW) is a specialized form of insurance or warranty provided to buyers of new homes, offering protection against specific defects and issues that might arise related to construction quality and workmanship. HOW typically covers structural components of the home like roofing, foundation, walls, and major systems such as HVAC and plumbing. The warranty is usually extended by the builder or a third-party warranty company and varies in duration, commonly offering coverage in increments such as one-year, two-year, or ten-year terms.

Key Features of a Homeowners’ Warranty Program

Coverage Against Defects: The HOW covers defects related to materials and workmanship, ensuring that the builder addresses and rectifies any issues that might undermine the integrity of the home.
Structural Protection: Major structural components like the foundation, walls, and roof are usually covered for a longer period, protecting against serious issues that can impact the safety and usability of the home.
Mechanical Systems: Vital systems such as plumbing, electrical systems, and HVAC are typically included under such warranty programs, reducing the burden on homeowners for repairs and replacements.
Transferability: Some HOW warranties are transferable to new owners if the home is sold within the warranty period, adding to the resale value of the home as it provides added peace of mind to potential buyers.
Third-Party Mediation: In the case of disputes, many HOW programs offer mediation or arbitration services between the homeowner and the builder to expedite resolution.

Examples of a Homeowners’ Warranty Program in Action

One-Year Workmanship Warranty: Covers defects in workmanship and materials, such as improperly installed flooring, loose tiles, or cabinetry issues.
Two-Year Systems Warranty: Covers defects in mechanical systems like heating, ventilation, and air conditioning (HVAC) systems, as well as plumbing and electrical works.
Ten-Year Structural Warranty: Covers major structural elements including the foundation and load-bearing aspects of the home, offering protection against significant defects that could compromise the structure’s integrity.

Frequently Asked Questions

Q: What does the Homeowners’ Warranty Program typically cover? A: The HOW typically covers workmanship and material defects, mechanical systems, and structural components. However, exact coverage will depend on the policy terms.

Q: Is the HOW required by law? A: While not legally mandatory, many builders offer HOW as a reassurance to buyers, and it is often recommended or even required by lending institutions.

Q: How long does the Homeowners’ Warranty Program last? A: Coverage periods can vary but commonly include one year for workmanship, two years for mechanical systems, and ten years for structural components.

Q: Can the Homeowners’ Warranty be transferred? A: Yes, many HOW programs are transferable to subsequent owners within the warranty period, making the property more attractive to potential buyers.

Q: How do I file a claim under the Homeowners’ Warranty Program? A: To file a claim, homeowners typically need to notify the builder or warranty provider in writing within the warranty period and provide detailed information about the defect or issue.

Builder’s Warranty: A guarantee provided by builders ensuring the home meets certain standards of quality and durability and covers repairs for specified defects.
New Home Warranty: A type of warranty that offers protection to homebuyers specifically for newly constructed homes against a range of defects in workmanship and materials.
Construction Defect: Deficiencies in the design, workmanship, or materials used in the construction of a building that result in failure or non-performance.
Structural Warranty: A warranty that specifically covers significant structural components of a home, protecting against serious issues like foundation failures or load-bearing wall problems.
Home Inspection: A thorough examination of the home’s condition often required before purchase, ensuring compliance with building codes and identifying any potential defects.

Online Resources

References

“The House Builder’s Bible” by Mark Brinkley
“Home Warranty Policies and You” - HUD Government Publishing Office
“Residential Construction Performance Guidelines” by the National Association of Home Builders

Suggested Books for Further Study

“New Home Buying Essentials” by Katherine Salant
“The Complete Guide to Home Warranty Programs” by Sally Davidson
“Real Estate Law” by Robert J. Aalberts

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

### What is typically included in a one-year workmanship warranty under the Homeowners’ Warranty Program (HOW)? - [x] Coverage of defects in materials and workmanship such as improperly installed flooring - [ ] Coverage of structural defects like a failing foundation - [ ] Repairs of major systems like HVAC systems - [ ] Coverage of the home’s exterior paints > **Explanation:** A one-year workmanship warranty commonly focuses on the contractor’s or builder’s material-related and workmanship-related mistakes, covering easily observable defects such as improper installation of flooring or cabinetry. ### How long is the typical warranty for mechanical systems like HVAC under the HOW? - [ ] One year - [x] Two years - [ ] Five years - [ ] Ten years > **Explanation:** Generally, mechanical systems like HVAC, plumbing, and electrical systems have a standard coverage period of two years under the typical Homeowners’ Warranty Program. ### For what duration does a typical structural warranty under the HOW provide coverage? - [ ] One year - [ ] Two years - [ ] Five years - [x] Ten years > **Explanation:** A standard structural warranty offers ten years of coverage, protecting against significant structural defects affecting the home’s foundational and load-bearing components. ### Is the Homeowners' Warranty Program legally mandatory for all new homes? - [ ] Yes, in all jurisdictions - [ ] No and it is rarely used - [x] No but commonly provided by builders - [ ] Yes, only in certain states > **Explanation:** While not a legal requirement in most places, the HOW is often provided by builders as a value-added assurance to homebuyers. ### What type of home is primarily associated with HOW coverage? - [ ] Older homes undergoing resale - [x] Newly constructed homes - [ ] Historic buildings - [ ] Condominiums that are 30+ years old > **Explanation:** The Homeowners' Warranty Program is predominantly associated with newly constructed homes to guarantee the quality and standards of recent builds. ### Is the Homeowners’ Warranty Program transferable to subsequent buyers? - [x] Yes, often transferable within the warranty period - [ ] No, it expires once the home is resold - [ ] Only if the builder agrees to a transfer - [ ] Only in certain states > **Explanation:** Many HOW warranties are designed to be transferable, allowing subsequent purchasers of the home some coverage under the original terms, enhancing the home’s marketability. ### What should a homeowner do to file a claim under the HOW? - [ ] Ignore it and fix the issue out-of-pocket - [ ] Speak informally to the builder without any written notification - [x] Submit a written notification to the builder or warranty provider - [ ] Call a home inspector before informing anyone else > **Explanation:** To initiate a claim under the HOM warranty, the homeowner should formally notify the builder or warranty provider in writing, detailing the specific defect or issue. ### Why is the Homeowners' Warranty Program beneficial to new home buyers? - [ ] It quickly appreciates the value of the house - [ ] It covers unrelated personal home improvements - [x] It offers peace of mind against unforeseen repair expenses due to construction defects - [ ] It does not provide any tangible benefits > **Explanation:** The HOW offers new home buyers peace of mind by covering unexpected repair costs arising from construction-related defects, ensuring the integrity and durability of the home. ### Which system is generally not covered under the typical HOW mechanical systems warranty? - [ ] Plumbing - [ ] HVAC - [ ] Electrical - [x] Landscaping irrigation > **Explanation:** The HOW generally covers internal mechanical systems like plumbing, HVAC, and electrical systems but does not extend to exterior systems like landscaping irrigation. ### In case of a dispute over a HOW claim, what service is often available to homeowners? - [ ] Small claims court - [x] Mediation or arbitration - [ ] Filing a new construction lawsuit - [ ] Canceling the warranty contract > **Explanation:** Many Homeowners’ Warranty Programs offer mediation or arbitration services to resolve disputes between homeowners and builders efficiently.