The definitive guide to structural warranties (Part 2)
In Part 1 of our definitive guide to structural warranties, we looked at three important basics about structural warranties. Knowing what a structural warranty is, what it does, and common causes of structural defects is helpful. But how does it benefit you and your buyers, and how does the claims process work? Today, we’ll explain.
How structural warranties benefit home builders and buyers
Structural home warranties benefit builders and buyers. Here’s a closer look at how builders and buyers can benefit from coverage:
Benefits to home builders
- Protects your profit and reputation: An insurance-backed structural warranty protects you and your buyers against the costs to repair qualified structural defects in the home. On average, it costs between $42,000 and $113,000 to address each structural claim. A structural warranty from 2-10 Home Buyers Warranty (2-10 HBW) moves that liability away from you and your buyers and onto our warranty insurers.
In addition to protecting your profit, warranty coverage from 2-10 HBW protects your reputation. It tells your buyers, “I back up my commitment to building quality homes with a structural warranty from the industry leader. If you were to have a structural issue, I have the best available solution.” When you can leverage your reputation to sell more homes, it can be a boon to you.
- Gives buyers something they really want: When buyers learn about structural warranties, they want one. Four of five buyers value an insurance-backed, third-party warranty. Providing a structural warranty from 2-10 HBW fulfills that want.
- It’s easier to handle complaints: When you provide a structural warranty to your buyers, everyone is on the same page. Because it’s a written contract, it clearly outlines the responsibilities you and your buyers have regarding the house. Setting expectations in no uncertain terms makes handling complaints much easier. Additionally, 2-10 HBW offers Front Line Warranty Service, which allows you to let 2-10 HBW’s experts handle claim callbacks and filter out unqualified claims for you.
- Helpful sales and marketing tool: 94% of prospective home buyers say that they’re more likely to purchase a new home from a builder who offers a third-party structural warranty. A structural warranty from 2-10 HBW can be the thing that puts your prospects over the top, turning them into clients.
Benefits to home buyers
- Eliminates worry: An insurance-backed structural warranty is a unique product. Like insurance, the hope is that it’ll never be necessary. But if something does go wrong structurally, it’s important protection to have. The likelihood of needing structural warranty protection is higher than many homeowners realize. Knowing they’re covered for 10 years can provide a great deal of relief.
- A structural warranty adds value: A structural warranty from 2-10 HBW is fully transferable. So, if your buyer sells the house within 10 years of buying it, they can transfer the warranty to the next owner, adding value to the home.
- Easy access to advice: To help with homeowner questions, 2-10 HBW employs a Warranty Administration team. This team helps homeowners determine whether their issue is structural or the result of something else. Having a helpful team available can make owning a home, and the associated maintenance, far less daunting.
How the structural warranty claims process works
It’s easy to file a structural claim and start the process. Either you or the homeowner completes a claim form through Builder or Homeowner Portal. The homeowner then pays a small claim investigation fee to the warranty insurer. This investigation fee reduces the volume of unqualified claims and is different from the structural engineer’s inspection fee.
The structural engineer’s inspection fee can cost up to $2,000. However, your homeowners are not responsible for the cost of the engineer’s inspection (that’s 2-10 HBW’s responsibility). They only pay the small claim investigation fee. Additionally, 2-10 HBW’s Warranty Administration team will help the homeowner determine whether visible distress is a valid structural claim.
Once you or the homeowner files the claim, you’ll both receive updates on the claim. Neither you nor the homeowner needs to do anything more after filing the claim. The structural warranty transfers the risks associated with qualified structural defects to the warranty insurer.
So, the warranty insurer handles the investigation and repair of the structural claim.
How long does the claims process take?
Every claim is unique. So, there’s no definitive timeline for how long structural repairs may take from claim submission to repair completion. For instance, framing repairs, which comprise 20% of all structural defects, are usually quick to fix. But for damage caused by soil movement, which causes 80% of structural defects, the repair timeline depends on the amount of investigation required.
More complicated structural defects often require soil testing before anyone can create a repair plan. Soil testing is important when damages are the result of soil settlement or heave.
What happens after someone files the structural claim?
First, the structural engineer comes to inspect the dwelling. They’ll look at the home’s load-bearing components. Although there may be cosmetic cracks in stucco, masonry, or drywall, these are not load-bearing elements. However, they may be symptoms of foundation movement or other movement. The engineer will record this distress, as well as doors and windows with operational problems.
The engineer may also require an elevation survey to assess the relative levelness of the home. They will then forward a comprehensive report—including photos, elevation readings, and measurements—to the warranty insurer.
What happens if the structural damages qualify as covered?
If qualifying structural damage to the home exists, the warranty insurer will accept the claim. The engineer will then create and propose a repair plan to restore the house to its previous condition. As a builder, you do not need to be involved in planning or repairing, unless you have specialized knowledge that would be helpful when creating the repair plan.
Once everyone agrees to the repair plan, local contractors will bid for the work. Repairing structural damages is specialized and intricate work, so the warranty insurer works with carefully selected, local contractors. If the home is in imminent danger of collapse, contractors will stabilize the home until they can complete repairs.
After the contractors finish repairs, the structural warranty’s limits decrease by the cost of the repairs. Note: The structural warranty’s limits (i.e., the warranty insurer’s aggregate liability) is equal to the purchase price of the home. So, if a $400,000 home has a structural defect that costs $100,000 to fix, the remaining warranty limit over the remaining warranty term would be $300,000.
The remaining warranty term does not increase or decrease because of the repairs. So, if an additional structural defect occurs during the remaining term, the warranty insurer will adjust the additional claim, as long as the initial claim didn’t max out the home’s warranty limits.
Occasionally, structural damages to a home are so severe that the home is considered a “total loss.” This means the cost of repairs exceed the value of the home. In this instance, the warranty insurer would pay the homeowner the original purchase price for the home.
A structural warranty is an important tool that can protect you and your buyers from huge financial losses resulting from expensive structural repairs. Unfortunately, structural defects are relatively common in the residential construction industry. But with an insurance-backed structural warranty from 2-10 HBW, you and your buyers can rest easy knowing that if things go wrong, nearly everything will be taken care of.
Learn how you can protect your business and add valuable selling points to your new builds with a 2-10 HBW structural warranty.