Definition
The Homeowner Warranty Program (HOW) is a private insurance initiative in which builders participate to protect purchasers of newly constructed homes against structural and mechanical faults. This warranty serves as a safeguard, providing homeowners with coverage in case significant defects arise in their newly built homes.
Examples
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Example 1: Structural Coverage
- A homeowner discovers a major issue with the foundation of their newly built home, which could lead to significant repairs and costs. Under the HOW, they are protected financially against these structural defects.
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Example 2: Mechanical Coverage
- A newly built home’s HVAC system malfunctions within the first year. The HOW insurance would cover the costs associated with repairing or replacing the faulty heating system.
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Example 3: Builder Participation
- A building company enrolls in the HOW program to offer potential buyers confidence and security. By providing this coverage, the builder distinguishes themselves in a competitive real estate market.
Frequently Asked Questions
What types of defects are typically covered under the HOW program?
The Homeowner Warranty Program usually covers significant structural defects such as foundation cracks, load-bearing wall issues, and major roofing defects. It also ensures mechanical systems like plumbing, electrical, and HVAC systems are functioning properly.
How long does the coverage from a HOW program last?
The duration of coverage can vary but often includes a one-year period for workmanship and materials defects, two years for mechanical systems such as plumbing and electrical problems, and ten years for major structural defects.
Is the HOW program mandatory for all builders?
Participation in the Homeowner Warranty Program is typically voluntary. However, many builders choose to enroll to offer an additional selling point and guarantee to prospective buyers.
What should homeowners do if they discover a defect covered by HOW?
Homeowners should promptly contact their builder and the HOW insurance provider to report the defect. They may need to provide documentation and allow for inspections to validate their claims.
Are there any exclusions in the HOW program?
Yes, there can be exclusions. Common exclusions include damage resulting from natural disasters, misuse, neglect, or alterations made by the homeowner after the purchase.
Related Terms
- Builder Warranty: A limited warranty offered by home builders which covers various aspects of new home construction, usually separate from HOW insurance.
- Extended Warranty: Additional coverage that goes beyond the standard builder warranty, often purchased by the homeowner for further peace of mind.
- Structural Warranty: A specific type of warranty that covers major structural components of a home such as the foundation and load-bearing walls.
- Mechanical Systems Warranty: Covers the core systems within a home, including plumbing, electrical, and HVAC systems.
Online Resources
- National Association of Home Builders (NAHB) - Home Buyer Resources
- Better Business Bureau (BBB) - How to Choose a Builder Warranty
- Federal Trade Commission (FTC) - Warranties
Suggested Books for Further Studies
- “Complete Book of Home Warranty Tips” by David Black
- “The New Homeowner’s Handbook: What to Do After Your Move In” by James Barry
- “Residential Building Codes Illustrated: A Guide to Understanding the 2021 International Residential Code” by Steven R. Winkel and Francis D.K. Ching
Fundamentals of Homeowner Warranty Program (HOW): Real Estate Basics Quiz
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