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http://realestate.msn.com/article.aspx?cp-documentid=22174095
5. “Your warranty may be worthless.”
Many homebuilders tout 10-year warranties as protection against future problems. But these warranties are often extremely limited in coverage, particularly after the second year. “It gives people a false sense of security,” says Brent Lemon, a Dallas attorney who represents homebuyers. “Most of these basically require that the house fall down on top of you before they kick in.” Consider the warranty offered by Denver, Colo.-based Home Buyers Warranty. It lists 71 exclusions and, like many, states that the home must be “unsafe, unsanitary or otherwise unlivable” to get structural-defect coverage. Em Fluhr, the warranty company’s CEO, says, “If (homebuyers) detect any worsening of the situation, they can submit another claim.”
The root of the problem with warranties is that builders characterize them too broadly when they say they’ll help protect homeowners who discover a structural problem, says Anne Stark, a Dallas attorney specializing in homebuyer complaints. “Structural-defect coverage often covers only catastrophic failure,” Stark says. “Builders will say you’ve got a great warranty, but then you wake up in the third year with cracks all over your house and you call the warranty company and they say, ‘Sorry, it’s not a structural failure.’” Some states, like Texas, are aiming to alleviate the problem: In 2003, it created the Texas Residential Construction Commission to help builders resolve disputes without litigation. “We require a warranty whether the builder wants to give it or not, and that warranty needs to meet the minimum level of state standards,” says Duane Waddill, executive director of the commission. “Even if the builder goes bankrupt, the buyer has additional protection.”
