Should You Buy a Home Warranty on a New Home?

Should You Buy a Home Warranty on a New Home?

If you’re buying a newly built home, you just might believe that nothing can go wrong with its workmanship, or at least not any time soon. After all, whether your home is a custom build or part of new housing development, the construction, installations, and electrical and plumbing systems are all new, not to mention recently inspected. Appliances and other fixtures are also brand new, without the wear and tear you’d find in a resold home. But, as experts and other homeowners will tell you, even newly constructed houses can sometimes have problems, incurring unexpected expenses you probably didn’t factor in to your budget when planning for your new home. A warranty program that covers construction related defects could offset some of those repair costs, but do you really need a home warranty on a newly built house?

Before deciding whether or not a warranty program is right for you, check to see if your new construction home is already covered. Some states, such as New Jersey and Louisiana, require that builders provide a warranty to take care of potential construction defects on structural and mechanical systems on all new builds. Builders’ warranties usually provide coverage for a minimum of one to ten years, although time frames can vary from state to state. Most reputable builders will schedule a home inspection just prior to the warranty’s expiration date in order to take care of any necessary repairs. Builders’ warranties are typically paid by the builder/seller, and go into effect at closing. Be aware, however, that this type of warranty is valid only so long as the builder remains in business. 

If your newly constructed home is in a state that doesn’t require a builder’s warranty, or if you want to supplement a plan that is already in place, consider enrolling in a home warranty program through a private company.  There are many such entities out there that offer a range of options for newly constructed homes, many with better coverage and longer terms than some state mandated builder’s programs.  Do your research, get word of mouth recommendations, and have a clear understanding of the company’s terms, fees, and reputation. If you opt for coverage from a private company, you can expect to pay as much $500 a year for a new build warranty program. 

Most warranties offer long term programs that cover up to 10 years or longer for structural issues, such as cracks or leaks in the foundation, sagging roof beams, or other construction related problems.  Typically, home warranties also provide coverage from one to five years for workmanship defects on things such as stucco or drywall, or for problems with electrical, heating and air, or plumbing systems. It’s important that you understand the full terms of your home warranty; you may find that appliances, windows, and other fixtures come with separate manufacturers’ coverage, with expiration dates and criteria for repair different than other items covered by your home warranty. You may also find that major systems such as heating and air conditioning units have only limited coverage, while pools or outbuildings aren’t covered at all. Although some companies may offer short term replacement or repair coverage for features such as flooring and tile, typically, cosmetic flaws in your new home that are the result of daily living are not covered by warranty, nor are damages caused by natural disasters such as fire and flooding that your homeowner’s insurance is designed to handle.

No matter what type of warranty your home has, be sure that you not only understand your coverage, but also what steps you must take in order to have needed repairs done. Know what your responsibilities are as a homeowner; failure to uphold your end of a warranty contract by neglecting basic home maintenance could result in having a repair request turned down by your provider, incurring an added expense to you. Note, too, that you can still expect to pay an out of pocket home service call fee even for repairs that are covered under warranty. 

So, should you purchase a home warranty for your newly constructed home? Although some real estate experts suggest that home warranties aren’t worth their fees because of less than expected savings and the large number of unresolved claims against builders, others disagree, citing that since defects in new constructions often don’t show up until several months after a home has been lived in, buyers can feel a certain peace of mind knowing their new home warranty is there to help offset the cost of whatever structural deficiencies may occur in the future. As an added plus, since many new build warranties can be passed on to the next buyer, having a home warranty already in place has proven to be a draw when a home eventually go up for resale. 

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