Warranty

What is a Warranty in Real Estate?

A warranty in real estate is a promise or assurance provided in a contract that certain conditions or aspects of a property will be maintained for a specified period. This promise can relate to various components of the property, such as structural integrity, appliances, systems, and other elements. Warranties are typically provided by sellers, builders, or developers and serve to protect the buyer from unforeseen issues or defects that may arise post-purchase.

Examples of Real Estate Warranties

New Home Construction Warranty: This type of warranty is often provided by builders and covers defects in materials and workmanship for a period of time, typically ranging from one to ten years. For example, a new home might come with a one-year warranty on all building materials and ten years for structural integrity.
Home Appliance Warranty: A warranty that covers certain household appliances included in the sale of a home. For instance, if a new refrigerator, stove, or dishwasher is part of the sale, the seller might offer a one-year warranty.
Roof Warranty: A warranty specifically covering the roof of a property. For example, a buyer receives a 20-year warranty from the builder guaranteeing the roof will remain free of leaks or defects for the duration.

Frequently Asked Questions (FAQ)

Q1: What is typically covered under a basic structural warranty?
A: A basic structural warranty usually covers major structural elements of the property, such as the foundation, floors, walls, and roof. It may guarantee the property against significant structural defects for a specified period, generally up to ten years.

Q2: Are warranties transferrable from the original purchaser to subsequent buyers?
A: Some warranties are transferable to future owners, while others are not. It depends on the terms set forth by the original warranty provider. It’s essential to check the specific details of each warranty to determine if it is transferrable.

Q3: What should I do if I find a defect covered under my property warranty?
A: If a defect that falls under your property’s warranty is identified, you should promptly notify the warranty provider, which could be the seller or builder. They will instruct you on the steps to take to initiate a claim, typically requiring an inspection and subsequent repairs.

Q4: Is home warranty the same as homeowners insurance?
A: No, a home warranty is not the same as homeowners insurance. A home warranty typically covers repairs and replacements for major components of the home, such as systems and appliances. Homeowners insurance, on the other hand, protects against damage from accidents or disasters like fires, storms, or theft.

Homeowner’s Insurance: Financial protection against loss or damage to a home and its contents, typically from perils such as fire, theft, or natural disasters.
Builder Warranty: Warranty provided by builders covering construction defects in newly built homes or properties.
Home Inspection: A thorough examination of the property’s condition conducted before the sale is finalized.
Contract of Sale: A legal document outlining the terms and conditions of the sale of property, including any warranties provided.
Structural Integrity: The condition of a property wherein it remains sound and free of structural defects.

Online Resources

References

“Real Estate Law: Fundamentals for The Development Process” by Peter E. Smirniotopoulos
“The Home Buying and Selling Survival Kit” by Sid Davis
American Home Shield (AHS) Website

Suggested Books for Further Studies

“The Complete Idiot’s Guide to Selling Your Home” by Katie Severance and Nancy Gentile
“Home Buying For Dummies” by Eric Tyson and Ray Brown
“Real Estate Investing for Dummies” by Eric Tyson and Robert S. Griswold
“The Book on Rental Property Investing” by Brandon Turner
“Real Estate Law, 11th Edition” by Marianne Jennings

Real Estate Basics: Warranty Fundamentals Quiz

### How long is a typical structural warranty provided by builders for new homes? - [x] Up to ten years - [ ] One year - [ ] Five years - [ ] Lifetime > **Explanation:** Most structural warranties provided by builders for new homes typically cover major structural elements like the foundation and roof for up to ten years. ### Can a home warranty be transferred to a new owner? - [x] Sometimes, depending on the warranty terms - [ ] Always - [ ] Never - [ ] Only if the new owner pays a transfer fee > **Explanation:** Whether a home warranty is transferable depends on the specific terms outlined by the warranty provider. Some warranties are transferable, while others are not. ### Which is generally covered by a home warranty but not by homeowners insurance? - [x] Repair or replacement of home systems and appliances - [ ] Fire damage - [ ] Theft of personal property - [ ] Natural disaster damage > **Explanation:** A home warranty typically covers the repair or replacement of major home systems and appliances, while homeowners insurance covers damage from incidents such as fires, theft, or natural disasters. ### What action should you take if you discover a defect covered under your warranty? - [x] Notify the warranty provider promptly - [ ] Fix the defect yourself - [ ] Ignore it - [ ] Sell the home as-is > **Explanation:** If a defect is discovered that falls under your home warranty, you should notify the warranty provider promptly to initiate a claim for inspection and repair. ### Are cosmetic defects typically covered under a new home warranty? - [ ] Always - [ ] Never - [x] Sometimes, depending on the terms - [ ] Only if they are structural > **Explanation:** Coverage for cosmetic defects under a new home warranty varies; while some warranties may cover minor cosmetic issues, others might not. ### What's the primary difference between a home warranty and a builder warranty? - [x] A home warranty usually covers appliances and systems, while a builder warranty covers construction defects - [ ] A home warranty is for existing homes only - [ ] A builder warranty can only be issued after the first year - [ ] There is no significant difference > **Explanation:** A home warranty generally covers appliances and systems within the home, while a builder warranty specifically covers construction defects. ### What might be excluded from coverage in a builder warranty? - [ ] Foundation issues - [x] Normal wear and tear - [ ] Structural defects - [ ] Roof leaks > **Explanation:** Builder warranties typically exclude normal wear and tear that results from regular use over time, even though structural defects and other issues may be covered. ### Why are warranties important for real estate transactions? - [ ] They are decorative agreements with no real purpose. - [ ] They primarily increase the property's value. - [x] They provide protection and peace of mind to the buyer against unforeseen defects. - [ ] They eliminate all property-related expenses. > **Explanation:** Warranties offer protection and assurance to the buyer, covering unforeseen defects and repairs, thereby providing peace of mind during real estate transactions. ### Can a seller offer a warranty for used appliances in an existing home sale? - [x] Yes, the seller can offer a warranty on used appliances - [ ] No, only new appliances can have a warranty - [ ] Only third-party companies can offer such warranties - [ ] Warranties cannot include appliances > **Explanation:** A seller can provide a warranty that includes coverage for used appliances in an existing home sale, typically through a third-party home warranty provider. ### What is the typical duration of a home appliance warranty in real estate? - [x] One year - [ ] Five years - [ ] Three months - [ ] Lifetime > **Explanation:** The typical duration of a home appliance warranty provided in a real estate transaction is often one year, covering defects or issues that arise during that period.