Nightmare on Overwhelmed Street: Why warranties matter
It’s late on a stormy Friday night. You’re having a nice dinner with your family. Suddenly, your phone buzzes and rings loudly, even though you turned it off when you sat down. You don’t recognize the number but reluctantly answer.
“Dreamy Custom Homes,” you begin to say.
You’re immediately met with a raspy, angry voice.
“This is Fred Brueger.”
You recognize the name but can’t quite place it.
“How can I help you, Fred?”
You hear several deep breaths before Fred hisses, “You need to come over to fix my house. Now.”
You suddenly remember Fred as an odd, private fellow with a distinct leathery complexion. You vaguely recall building him an unusual custom home about eight years ago.
Fred’s revenge: The curse of a house with no warranty
“What seems to be the problem?” you ask hesitantly.
“For starters, the sewer is backed up, and the plumber said it’s due to foundation movement,” Fred says. “The basement is always dripping and has a putrid stench. My foundation has huge cracks.”
Fred’s voice starts getting angrier, and he picks up his pace.
“The floor slopes so much that my guest has to use the brakes on his wheelchair. And my doors stick so much that I can’t even get to work . . .”
Fred catches himself before growling, “. . .making dreams come true.”
Your heart races as you try to find the right words to get out of this horrible predicament. Then it hits you: You only offer a one-year warranty, and that expired years ago.
You politely share this revelation with Fred. After several seconds of silence, Fred snarls.
“You’ll be hearing from my lawyer. And don’t be surprised if you hear from my neighbors too. Several of your homes on our street have similar problems.”
He abruptly hangs up. As you put the phone back in your pocket, you glance at your family in disbelief.
Two weeks later, you receive a hand-couriered letter. You anxiously open it and read it out loud.
“The legal firm of Lecter, Meyers, & Bates, PC, is demanding that Dreamy Custom Homes immediately make extensive repairs, compensate for the diminished value of the home, pay the homeowner’s living expenses, and cover all attorney’s fees. Your refusal will result in swift legal action.”
Much to your surprise, the letter claims that there’s a 10-year implied structural warranty in your state. As you wonder what an implied warranty is, panic sets in. You realize your company doesn’t have the funds to pay for this home or any of the other homes you built in the last 10 years. The excruciating thought of bankruptcy crosses your mind. You worry about your hard-earned reputation in the community.
A few days later, Fred’s prediction comes true. Fred’s legal firm knocked on all the doors on Overwhelmed Street and found similar problems. Suddenly, one big problem turned into a living nightmare.
How can you avoid the nightmare on Overwhelmed Street?
Let’s rewind and replay this exact same scenario with one change. In this version, you originally enrolled your homes in an insurance-backed structural warranty from 2-10 Home Buyers Warranty (2-10 HBW).
“Hello, this is Dreamy Custom Homes.”
“This is Fred Brueger. I have a killer of a problem on my hands.”
After calmly and patiently listening to Fred, you sincerely apologize. You explain that despite a builder’s best efforts, foundation problems sometimes do occur due to unforeseen soil conditions. Then you confidently inform Fred that you covered his home with a 10-year structural warranty from 2-10 HBW. You provide 2-10 HBW’s phone number to Fred. He thanks you, and you calmly rejoin your family dinner.
That’s the last you hear from Fred because Fred calls the number and reaches Tina. Tina is a Warranty Administration Expert who’s reconciled thousands of these difficult calls. Tina talks with Fred, listens to his complaints, and validates the information against the warranty coverage standards.
Quickly recognizing the severity, Tina transfers the call to Mary, a seasoned Claims Adjuster with the warranty insurer. Mary continues to comfort Fred by informing him that she’s dispatching a local, independent, professional engineer to investigate.
The independent engineer completes her investigation, and the insurer’s engineering team reviews it. The insurer informs Mary about their conclusions.
Mary calls Fred to tell him that the cost to make structural and cosmetic repairs will be $43,000, which is about average for a foundation problem. Before Fred can panic, Mary assures him that the warranty company will pay to fix it, not him. Independent contractors complete the repairs quickly, and Fred is thrilled with the results.
A dream ending to a nightmare scenario, thanks to structural warranty coverage
Throughout the process, Mary kept you in the loop. She also told you that she was processing two other new claims on the street the same way. With warranty protection, neither Fred’s claim nor the other two claims cost you a penny.
But what would have happened in a worst-case scenario—Fred refusing the $43,000 settlement and suing instead? The mandatory arbitration clause in the warranty would have protected you and your company.
Most industries in nearly every state in the US use arbitration. The process is fair and reasonable for both parties, since arbitration takes place in the home with an experienced construction arbitrator. Arbitration is much quicker and less expensive than a court proceeding, and the outcome is legally binding.
Unfortunately, the nightmare on Overwhelmed Street plays out all too often in real life. It’s not common knowledge that every state has implied warranties established by court rulings. And the courts are full of construction litigation. For this reason, some states have even resorted to mandatory warranties for every new home.
The typical cost to protect an average home against structural defects through a structural warranty is about $500 paid at closing. That amounts to just $50 per year for 10 years. Compare that to $42,000–$113,000 to address the average structural claim out of pocket. And as we’ve seen, both here and in other articles, structural defects can happen in bunches.
Don’t risk living an all-too-common nightmare. Let the experts at 2-10 HBW handle your warranty claims. Sleep well at night by protecting your hard-earned reputation and your business with an insurance-backed structural warranty.
Learn how you can protect your business and add valuable selling points to your new builds with a 2-10 HBW structural warranty.
Special thanks to Walt Keaveny, whose expertise inspired this article.