Moving into your new house does not break the ties that bind you to your builder. Quite the contrary, which is why new-home buyers should check into a builder’s reputation for handling call-backs before buying a house.
Is there an argument about every question or complaint, or is the builder known for prompt and friendly service?
Perhaps the best guarantee of good service is a warranty in writing, especially since state law regarding builder negligence relies on Illinois common law, known as “implied warranty of habitability,” which is far from clear-cut, said Jeffrey Widman, a lawyer with Arnstein & Lehr in Chicago.
One-year warranties for new homes are fairly standard in the industry, said Bob Johnston, executive director of the Home Builders Association of Greater Chicago. If, by chance, a new-home buyer is confronted with a builder who doesn’t offer a warranty, Johnston said, you should insist on one.
A builder “should tell you in writing what he’s going to do when a problem occurs in the house over the first year,” Johnston said. “He shouldn’t be simply saying, `Here it is, you take it, don’t call me, I won’t call you, good bye, good luck.’. . . If he doesn’t have (a warranty), we will find him one.”
New-home buyers will likely see two main types of warranties: one-year programs covering workmanship and materials, and insured warranties that continue through a second year for mechanical systems and 10 years for major structural components, such as bearing walls, roof framing members and foundation systems and footings.
In addition, some features of your house, such as roofing, furnaces and major appliances, will likely carry manufacturers’ warranties.
Some of the most common problems in new houses are settlement cracks in drywall, doors that don’t open properly and shrinkage in grout, builders agree.
“If you do it right the first time, normally, not much goes wrong,” said Gerald Clark, president of Lakelands Building Corp. in Plainfield.
Some things that may happen in your new house, however, are expressly not covered under typical warranties.
Usual exclusions include landscaping, such as a tree dying; or basement flooding caused by the homeowner changing the grading of the lot; problems caused by natural disasters, such as flooding, high winds or earthquakes; or problems caused by poor home maintenance.
For example, if the gutters are never cleaned, resulting in water damage to siding, repairs more than likely will be your responsibility, not the builder’s.
Or if high winds sheer off some shingles and the roof develops a leak, you’re responsible unless your homeowners insurance policy covers the damage.
Builders also carefully note in their warranties that buyers should not expect perfection, only general performance standards.
And, just as not all builders are created equal, not all warranties are equally inclusive. Johnston said he’d heard of one builder who expressly stated he wouldn’t fix nail pops, which are fairly common in new homes. More typically, builders will request that homeowners save up all the little things for one call-back toward the end of the first year.
Reading the fine print is a good idea so you don’t wear out your welcome with the builder; after all, you’ll need that builder if something goes wrong with the big-ticket items that are covered.
Many builders buy insurance to cover their expenses in living up to the warranties they give new-home buyers. But this insurance typically does not kick in for problems that occur in the first two years. The builder pays for those repairs out of his own pocket (or his company’s).
After that, your success in having the warranty honored may depend on the business practices and financial health of the insurance company issuing or guaranteeing the warrant.
The more extensive insured warranty was first made popular by the defunct Home Owners Warranty, which was extensively marketed by area builders by its acronym HOW before it was put into receivership by the Commonwealth of Virginia in 1994 for insufficient reserves to meet future claims.
Far from being soured by the HOW experience, many Chicago-area builders turned to its competitors for long-term coverage. One of its competitors, Home Buyers Warranty (HBW), of Tucker, Ga., has in the last five years marked a three-fold increase in membership in its northeast territory, from Nebraska to Maine, according to Lawrence Wolf, vice president.
Yet, a builder’s reasons for offering an insured warranty program go beyond brick and mortar.
“Buying a home is a very emotional experience,” said Todd Fishbein, vice president and general counsel for Red Seal Development Corp., a former HOW member that has joined Residential Warranty Corp., (RWC) of Harrisburg, Pa.
Buyers’ “biggest fear is that something may go wrong,” he said. “The warranty issue is an emotional issue. It gives people a sense of comfort.”
Red Seal, a custom-home builder based in Northbrook, uses the RWC warranty as a marketing tool, citing it as a “badge of approval” available only to builders who pass a rigorous screening process.
The warranty companies, besides thoroughly checking financial stability and references from subcontractors, homeowners, suppliers, etc., review a builder’s situation year to year in an effort to reduce risk; this is intended to eliminate marginally successful builders from its membership.
Other builders, however, have chosen to self-insure — issuing their own warranties — saying their confident of the quality of their houses and don’t want to spend the money paying premiums to a warranty program.
What may be the most reassuring fact of all to new home buyers is that, the better the quality of the houses being built, the better the builders’ bottom line.
“If you wanted to be the most profitable, you will build it right the first time and not have to go back and rebuild it,” said David Russo, executive vice president of Lakewood Homes, a former HOW member.
Builders agree with buyers that no problems is better than having problems covered by even the best warranty. And when a serious problem does occur, a reputable builder wants to fix it–regardless of whether he has a warranty insurance policy that will pay–rather than ignore it, which will cause ill will and, eventually, a drop in business.
“You get a major problem, you’re going to fix it because it’s simply a rare occurrence,” Russo said. “If you want to stay in business in Chicago, you want to take care of it.”
Two factors that can help builders deliver quality homes are good, stable soil conditions and vigilant building departments, said Steve Norris, director of quality assurance at the Cambridge Companies, a former member of HOW. These factors greatly reduce opportunities for disaster.
In addition, many builders, including Cambridge and Lakewood, give their buyers a a new-home manual that includes detailed information on maintenance, as well as how to contact the builder when something covered under the warranty needs fixing.
