What Builders Need to Know

Buying a home is one of the biggest decisions anyone will make over the course of their lives. As such, many prospective homebuyers want to lessen their risk as much as possible and increase the likelihood they will be happy with their purchase decision. Importantly, Builders also want to manage their risk of future litigation from these same homeowners. This type of risk management is most commonly made possible by Builders giving new homeowners express warranties when houses change hands.

Warranties assure homebuyers that the houses they are buying are in good condition. They also indicate to homeowners that a Builder is reputable and is willing to stand behind their work. Generally speaking, Builders have two options when it comes to issuing warranties. They can either issue them on their own (the builder keeps the risk), or they can transfer the risk to third-party warranty providers like American eBuilder.

By choosing American eBuilder for your warranty needs, you can insure your work for 10 years. This makes your homeowners happy, while protecting your business investments and professional reputation along the way.

Benefits of Third-Party Warranties

While some Builders choose to retain all of the risk and issue warranties on their own, others choose to outsource those responsibilities to third parties, such as American eBuilder, for the following reasons:

• Less expensive.  Warranties from third party warranty providers are considerably less expensive because they are able to spread the risk over thousands of homes. Additionally, Builders who use third parties also do not have to worry about writing, issuing and maintaining warranty records or hiring in-house staff to oversee these obligations.
• Less time-consuming. Third-party providers give Builders the peace of mind that comes with knowing they do not have to worry about warranty responsibilities. This enables them to spend more of their energy on building great homes and growing their business through well-formulated marketing campaigns.
• More customer-friendly. Many homebuyers prefer third-party warranties because if a Builder goes bankrupt, they may no longer honor warranties. Possessing a third party warranty affords the homeowner protection in these types of situations.
• More Builder-friendly.  In addition to specifying to a homeowner what is warranted, third party warranties also specify to a homeowner the issues and conditions that are not warranted or are excluded from the warranty. By doing so, the Builder does not have to deal with unrealistic expectations from homeowners.
• Sets Builders apart from their competition.  When prospective homebuyers are shopping for a Builder one of the most important elements that factor into their decision-making process is whether the builder is willing to stand behind their workmanship in constructing the home. Builders who offer 10 year structural warranties, such as one from American eBuilder, clearly state to prospective homebuyers that the house has been constructed with care by professionals who are confident in their craftsmanship.

Types of Warranties

Warranties on homes fall into two categories: implied warranties and expressed warranties. Implied warranties do not have to be spoken or written down. Instead, they are simply assumed because of the nature of a transaction. For example, unless stated otherwise, there is an implied warranty of habitability attached to transactions where homes change hands.

On the other hand, expressed warranties are agreed to verbally or are written down. Expressed warranties generally limit the items or conditions warranted, provide specific measurable performance standards on such items or conditions, and include dispute-resolution clauses. These expressed warranties also explicitly explain the finite time period during which the warranty applies.

Why Do Smart Builders Obtain Third-Party Warranties?

Some Builders might wonder why they need third-party warranties if they are already carrying commercial general liability and builder’s risk insurance. While those two forms of insurance certainly help builders manage their risk, they do not provide complete coverage after the sale has been completed. Generally speaking, liability insurance protects builders from being financially responsible for injuries and property damage that occurs as the result of negligence. Whereas, builder’s risk insurance provides protection against injuries and damages that occur during construction. Unfortunately, none of these forms of insurance protect builders from poor craftsmanship or defects that are uncovered after the title changes hands.

Smart Builders know that by supplementing those two forms of insurance with a third-party warranty, such as one from American eBuilder, Builders can rest comfortably knowing their companies are protected if any construction defects appear after a home is sold. These warranties clearly articulate what parts of the structure and which systems are covered — as well as which systems are not covered. Additionally, these warranties show how long a homeowner can expect the warrantor to be responsible for remedying them. For example, many structural components of a home are covered for a decade.

Furthermore, it is important to realize that Builders cannot rely on a structural engineer’s insurance. While these individuals will almost certainly carry their own insurance, Builders may still be found liable for poor workmanship or failure to follow an engineer’s recommendation.

Smart Builders also recognize that having a third-party warranty from American eBuilder makes it easier to find a solution if the Builder and homeowner are at an impasse or if the homeowner becomes unreasonable. With a third party warranty, an arbitrator will help the two parties find common ground, which saves Builders from having to incur the time and costs associated with protracted litigation.

No Confusing Vague Language

Many of our competitors’ definitions of a warranted structural defect are subjective and thus, open to interpretation and mis-interpretation by homeowners and by Builders. American eBuilder takes the guess work out of applying warranty standards. A third party warranty from American eBuilder contains objective, easily measurable standards, which have been gathered from established engineering and industry guidelines. Therefore, the homeowners know up front what issues are warranted and when, and what measurable condition has to occur for an issue to be warranted. Issues typically addressed in third party warranties, include but are not limited to, drainage, grading, doors, windows, flooring, walls, plumbing, electrical, structural, roofing, insulation, trim, fireplaces, HVAC systems, and more.

As you go about your search for a third-party warranty provider, it is recommended that you look for providers that have been in business for a decade or more and still have great reputations. You will also want to work with a company that has insurance backing, allows Builders to customize their warranties, has reasonable pricing, offers thorough and comprehensive warranties that include conflict resolution instructions, and has a history of paying claims in a timely manner.

If you have any questions about which third-party warranty provider will benefit your business the most, please contact American eBuilder today. We look forward to answering your questions and partnering with you.