You've just moved into your new home and life is grand. This is a new house, so everything should be perfect, right? If it isn't, you believe the contractor's yearlong warranty means he or she must return and fix all problems - large or small.
It might surprise you to learn builders do not have to deliver a "perfect" house, and there is no requirement in Washington state law that they give you a year's warranty on their workmanship.Even if you are given a homeowner's warranty, it might not cover cracks, creaks and squeaks, unless they develop to a point that your structure is considered unsound.
The builder is required to deliver a house that complies with the plans, building codes and commercially reasonable construction standards, according to Douglas Tingvall, general counsel for John L. Scott Real Estate.
Some cracking and settling is normal in a wood-frame structure with concrete foundation. But if the cracking or settling goes beyond normal construction tolerances or affects the serviceability of the structure, the builder must fix it, Tingvall says.
But if cracking or settling is purely cosmetic, the builder isn't required to repair it.
Tingvall says there is a widespread myth that Washington state law requires a one-year warranty. That belief probably originates in the requirement that consumers must file claims against a contractor's registration bond within one year after the bond has expired.
Calculating the time period in which you must make a claim against the contractor's bond is complex, explains Bill Ward, contractor registration technical specialist at the Washington state Department of Labor and Industries.
It's not just one year from the date the house was completed. Here's how it works: Contractors can register at any time during a year. But let's say your builder registered Jan. 1, 1998; his registration and bond expire Dec. 31, 1998. He completes your new home in early June. In that case, you have the remainder of June through the end of 1998, plus another year to file claims against his bond. If your home wasn't completed until late November 1998 and his registration expired Dec. 31, 1998, you would have one month in 1998 plus another year to file a claim against the bond.
Like Tingvall, Ward emphasizes that claims have to be made based on serious defects, such as a leaky roof, inadequate structure or plumbing faults.
And bear in mind that contractors' bonds are small compared with some of the problems that can develop in a home. A general contractor is required to have a $6,000 bond; a specialty contractor, such as an electrician, roofer or plumber, is required to have a $4,000 bond. However, that does not mean they've banked $6,000 or $4,000 in an account, more likely they've posted a portion of those sums.
Some construction firms extend the expected one-year warranty for new home-buyers by joining risk-retention groups such as 2/10 Home Buyers Warranty or Residential Warranty. Using Federal Housing Authority or Veterans Administration financing usually triggers a requirement for a 2/10 warranty.
For warranties from those corporations, a builder must meet specific membership criteria, have a good reputation in the industry and good credit references.
Additionally, the builder pays annual dues of several hundred dollars and a specified sum per thousand on the sale price of homes. The fees vary with the builder's experience and volume.
These costs presumably would be folded into the sale price of the house, though buyers are unlikely to see them itemized.
Under the "2 through 10" warranties offered by Home Buyers Warranty and Residential Warranty, the builder is expected to warrant the house against defects, structural and mechanical problems (heating, plumbing and electrical systems) for the first year; structural and mechanical systems for the second year.
Then the warranty plan picks up coverage for structural problems for years three through 10.
Don't assume all builders belong to these plans; ask ahead of time. Home Buyers Warranty has 11,000 members nationwide, 280 in Washington state. Residential Warranty has about 9,000 members nationwide; about 350 in Washington state.
Both corporations have mediation/-arbitration procedures in place if builders fail to meet their obligations, but consumers must first contact the builder. To avoid frivolous complaints, homebuyers must pay up-front fees of several hundred dollars to go through arbitration.
These warranties might sound a lot like insurance products; however, technically, they are not insurance. However, the Insurance Commissioner's office does accept complaints if consumers have problems enforcing these warranties, according to Jim Stevenson, an agency spokesman.
After the first-year warranty, builders' policies vary widely.
William Buchan Inc., which has built homes for more than 30 years, does not offer an extended "2/10" warranty, but often returns to homes that are 5 to 10 years old to handle a problem that might have been overlooked, said Eric Schopen, customer-service manager.
Connor Development, which also has built homes for more than three decades, does give a 10-year warranty.
Some problems that develop actually are normal "wear and tear," and some are beyond the control of the builder, notes Gary Wright, president of the Washington State Association of Realtors. Wright adds that about 5 percent of consumers pay for independent inspections because buying a new home is costly and complicated, particularly if they are first-time buyers.
Warranties for appliances are a different matter. Sometime during the purchase process, the builder should give you the manufacturers' warranties for all appliances.