Home Warranties: What’s In It For Me?October 19, 2017
Years ago, in a sales training class, the teacher emphasized that we must keep in mind the “what’s in it for me” aspect of selling. As a consumer, many of us need to confirm the positives of a purchase by identifying with the “WIFM” reasons to buy. So no matter your role in a new home transaction, when it comes to home warranties, ask yourself, “what’s in it for me”?
Home warranties are typically an added benefit that buyers receive, sellers give, and builders and real estate agents provide to relieve themselves of liabilities. Builders and real estate agents know they add value to their buyers’ purchase when the home warranty company delivers protection and confidence. The question many people have concerning the home warranty is ~ WIIFM? So let’s break this down! In this post, we will explain the benefits and the reason to include a home builder’s warranty outlining structural coverage on all new construction sales.
The Home Builder: When a home builder purchases a builder’s limited warranty for his buyer, he limits himself of long-term liability for construction defects over the term of coverage that has been purchased. Most home warranty companies offer as many as ten years of coverage on a structural failure which is typically longer than a state implied warranty term or if it matches the state’s term, the structural coverage is in express or written form, not just implied. Each company has a written definition of failure according to their insurer. The terms and conditions of structural failures and coverage is clearly defined when a builder joins a home warranty program. These points should be communicated to any potential buyer to set appropriate expectations on terms and coverage. The warranty may also have a dispute resolution process incorporated into the program that helps both builder and buyer navigate any disagreement over construction issues throughout the term of the warranty.
- What’s In It For Home Builders?: Cost savings. Long-term risk management. Client relationship management. A 3rd party independent process for mediation and/or arbitration. Marketing advantages. Increased credibility.
The Homeowner: When a new home has been purchased and has been enrolled in a builder’s limited warranty program, the buyer’s home is then protected from structural failures as defined in the warranty document. The homeowner has confidence in knowing that the state implied warranty is now extended to relieve both buyer and builder if future structural failures occur. If the builder should cease to be in business, the buyer is continually protected throughout the term of the structural warranty based on the written conditions. A 10-year builder’s limited warranty gives buyers and builders additional relief of unexpected issues that may arise. If a homeowner decides to sell within the 10-year warranty contract, the remaining years of the home warranty are transferable to the new homeowners that purchase this home, acting as a great marketing tool in resale transactions as well!
- What’s In It For Homeowner?: Protecting pocket books and saving money, if failures arise. A 3rd party independent process for mediation and/or arbitration. Quicker and higher resale prices.
The Real Estate Professional: When an agent is working with a client, taking the extra steps to review or request home warranties can turn them into a hero! Home buyers can rest assured knowing they have structural coverage to relieve them of unforeseen conditions that may arise during homeownership after buying a new construction home. Real estate professionals realize that builders go through a rigid qualifying process to join a warranty program and they are taking extra steps to insure and handle possible problems that could occur. An agent’s knowledge in home warranties provides clients with confidence in their sale and gives the agent a relief of liability. Additionally when relisting a home that has a builder’s warranty in place, agents can use this warranty as a great selling point, yet again!
- What’s In It For Real Estate Professional?: Risk Management and industry protection for real estate agents, brokers and real estate firms. Knowledge of industry standards and more credibility in your field. A negotiating tool. Quicker and higher resale prices.
The Future Homeowner: As a resale home that is still fairly new, a new buyer would receive any remaining years of the builder’s warranty that is in place on their home. The “change of ownership” only requires a quick and easy form submission to inform the warranty company of new owners. Then, if the new homeowner needs to contact the warranty company concerning an issue, they may file the claim accordingly. Again, all warranties have written processes and definitions. New homeowners must follow the requirements for claim.
- What’s In it for Future Homeowner?: Confidence in their purchase. Continued structural coverage remaining in a resale home. Protecting pocket books and saving money if failures arise. A 3rd party independent process for mediation and/or arbitration.. Quicker and higher resale prices.
The Lender: When loans on a new home are sold with a builder’s warranty in place, it decreases the risk of the loan. In the past years, while short sales and foreclosures have been on the rise, many of these homes were new construction sales and included a builder’s limited warranty covering structural issues. This is an additional risk reduction, marketing tool and assurance of relief for the lenders as well as all other parties involved in the sale.
- What’s In It For Lender?: Protection of lender’s financial interest. Continued coverage in event of foreclosure. Marketing tool for sales as well as increased credibility.
As you can see, a new construction builder’s warranty defining structural coverage is not just a frivolous expense for new construction homes, but a full service risk management and marketing tool that benefits all parties involved in a home purchase. For additional information on 10-year builder’s limited warranty programs for new home construction, contact your PWSC Regional Sales Director today!