Deciding whether to buy a new home or a resale one is a complicated process. There are plenty of factors that could swing your decision either way, depending on your situation. But one benefit of buying new is the new-home warranty that the builder packages in with your house.
When my wife and I had our new home built, we received a 1-2-10 warranty. Basically, the one-year component of the warranty covers pretty much anything that isn't cosmetic; the two-year component covers the major systems such as HVAC, electric, and plumbing; and the 10-year component covers major structural concerns such as the foundation and load-bearing walls.
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We hoped we wouldn’t need to use the warranty, but we were glad we had it just in case something went wrong. Of course, things did go wrong. Here’s how we ended up taking advantage of our new-home warranty and how it saved us thousands.
Things the Builder Missed Before Closing
Newly constructed houses aren’t perfect. That’s one of the major reasons to get a new-home warranty. The builder most likely used several subcontractors throughout the building process and didn’t check 100 percent of their work.
Unfortunately, there were some pretty significant oversights with our new home. The roofer forgot to complete the roof, leaving a six-foot section on its ridge without shingles of any type. This resulted in a warranty call to fix the roof and repair drywall damage caused by leaking rain.
If we had bought a resale home and found the same problem, we would have had to pay out of pocket — my guess is a few hundred to a thousand dollars.
Thankfully, the new-home warranty had us covered.
The builder also messed up a couple of other things. For example, it turned out that the garbage disposal wasn’t installed properly, and it ended up leaking. We noticed the issue quickly and put a bucket under it until the plumber arrived, which prevented major damage. It was a quick fix — the unit just had to be locked in place.
If there had been damage to our cabinets, our warranty would have covered it. The warranty also paid for the plumber, which easily could have cost us $50 to $100 for a simple service call.
As with any other home, things break with new houses. We needed to make a few warranty calls for problems that couldn’t have been prevented before closing.
We had to call the plumber a second time because our toilet stopped working. I could have fixed it myself in 30 minutes with $20 worth of parts from Home Depot. However, it was easier to call a professional who was already paid for. If I'd had called a plumber without having a warranty, I’d probably be out as much as $100.
We also had to call an electrician for a more serious problem. Whenever we flipped a particular light switch, it triggered our circuit breaker. I couldn’t have figured this one out myself, even if I wanted to. Thankfully, the electrician diagnosed the problem easily and remedied it by fiddling with a couple of wires in the wall. This would have cost me $100 or more without my warranty.
We had a few more minor problems that, instead of repairing them myself, I used our warranty for. Otherwise, it would have cost me about five hours of my time and probably another $200 if I had hired someone without having coverage.
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The Warranty Was Built Into the Price of Our Home
Despite what builders want you to think, the new-home warranty you get isn’t free. You’re paying for it one way or another. Whether the subcontractors increase their costs to include free warranty work, the builder gets billed for each warranty call, or the builder purchases a warranty for your home, there is a cost that’s factored into your new home’s price.
So if a covered problem pops up, don't hesitate to use your warranty.
My new-home warranty had no fees at all, and the vendor that originally completed the work fixed the problem each time. Both are good features you won’t get with a resale-home warranty.
Warranties Aren’t the Same With Resale Homes
I don't recommend resale-home warranties in most cases. They're sold by special warranty companies that make it expensive and difficult to get things fixed in a timely fashion.
Often, these warranties charge you a service-call fee, and you can't fix the issues with just one service call. In rare cases, home warranties end up working out perfectly and saving the homeowner money, but they’re usually a major hassle and you’re lucky to break even.
Is a New-Home Warranty Right for You?
“For homeowners, a home warranty can be a blessing or a curse, depending on the providers,” says Ben Mizes, CEO of Clever Real Estate. “As they almost exclusively subcontract, some home warranty providers hire the cheapest contractors and take a long time to fix problems. On the other hand, some companies are dedicated to helping homeowners, using vetted contractors and sending them out ASAP to deal with problems.”
Do your due diligence to make sure that your provider is one of the better ones. “If you do go with a home warranty, either for a newly built home or for a resale home, do your research,” Mizes says. “Check out Better Business Bureau (BBB) reviews, Yelp, and other online reviews to ensure it's a worthwhile investment.”
In the end, we probably saved somewhere between $1,000 and $2,000 with the warranty work we had done on our home. I’m glad we had a new-home warranty because it saved me a lot of hassle.
That said, I wouldn’t have bought a warranty if I had purchased the home as a resale. Instead, I would have hired a competent home inspector, which I now realize I should have done even for my new home.
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