Homeowner Warranty Program (HOW)

Definition

The Homeowner Warranty Program (HOW) is a private insurance initiative in which builders participate to protect purchasers of newly constructed homes against structural and mechanical faults. This warranty serves as a safeguard, providing homeowners with coverage in case significant defects arise in their newly built homes.

Examples

Example 1: Structural Coverage
- A homeowner discovers a major issue with the foundation of their newly built home, which could lead to significant repairs and costs. Under the HOW, they are protected financially against these structural defects.
Example 2: Mechanical Coverage
- A newly built home’s HVAC system malfunctions within the first year. The HOW insurance would cover the costs associated with repairing or replacing the faulty heating system.
Example 3: Builder Participation
- A building company enrolls in the HOW program to offer potential buyers confidence and security. By providing this coverage, the builder distinguishes themselves in a competitive real estate market.

Frequently Asked Questions

What types of defects are typically covered under the HOW program?

The Homeowner Warranty Program usually covers significant structural defects such as foundation cracks, load-bearing wall issues, and major roofing defects. It also ensures mechanical systems like plumbing, electrical, and HVAC systems are functioning properly.

How long does the coverage from a HOW program last?

The duration of coverage can vary but often includes a one-year period for workmanship and materials defects, two years for mechanical systems such as plumbing and electrical problems, and ten years for major structural defects.

Is the HOW program mandatory for all builders?

Participation in the Homeowner Warranty Program is typically voluntary. However, many builders choose to enroll to offer an additional selling point and guarantee to prospective buyers.

What should homeowners do if they discover a defect covered by HOW?

Homeowners should promptly contact their builder and the HOW insurance provider to report the defect. They may need to provide documentation and allow for inspections to validate their claims.

Are there any exclusions in the HOW program?

Yes, there can be exclusions. Common exclusions include damage resulting from natural disasters, misuse, neglect, or alterations made by the homeowner after the purchase.

Builder Warranty: A limited warranty offered by home builders which covers various aspects of new home construction, usually separate from HOW insurance.
Extended Warranty: Additional coverage that goes beyond the standard builder warranty, often purchased by the homeowner for further peace of mind.
Structural Warranty: A specific type of warranty that covers major structural components of a home such as the foundation and load-bearing walls.
Mechanical Systems Warranty: Covers the core systems within a home, including plumbing, electrical, and HVAC systems.

Online Resources

Suggested Books for Further Studies

“Complete Book of Home Warranty Tips” by David Black
“The New Homeowner’s Handbook: What to Do After Your Move In” by James Barry
“Residential Building Codes Illustrated: A Guide to Understanding the 2021 International Residential Code” by Steven R. Winkel and Francis D.K. Ching

Fundamentals of Homeowner Warranty Program (HOW): Real Estate Basics Quiz

### What main faults does the HOW insurance protect against? - [x] Structural and mechanical faults. - [ ] Natural disaster damages. - [ ] Homeowner negligence. - [ ] Cosmetic issues. > **Explanation:** The Homeowner Warranty Program is designed specifically to protect against significant structural and mechanical faults, not natural disasters, homeowner negligence, or cosmetic issues. ### How long typically does the structural defect coverage last in the HOW program? - [ ] One year - [ ] Five years - [x] Ten years - [ ] Fifteen years > **Explanation:** The typical structural defect coverage in the Homeowner Warranty Program lasts for ten years. ### Who generally participates in the HOW program? - [ ] Only homeowners - [ ] Only insurance companies - [ ] Builders and contractors - [x] Builders and homeowners > **Explanation:** Both builders and homeowners participate in the Homeowner Warranty Program. Builders enroll to offer this added protection to buyers. ### Does the HOW program cover damages from natural disasters? - [ ] Yes, all natural disasters. - [x] No, it excludes natural disasters. - [ ] Only floods. - [ ] Only earthquakes. > **Explanation:** The HOW program does not cover damages resulting from natural disasters; these are typically excluded from the home warranty coverage. ### What is a common first step if a homeowner discovers a defect covered under the HOW? - [ ] Contacting a lawyer immediately. - [x] Notifying the builder and the HOW insurance provider. - [ ] Ignoring it and hoping it gets better. - [ ] Making the repairs themselves. > **Explanation:** The first step is to notify the builder and the HOW insurance provider promptly to start processing the claim. ### Why might a builder choose to enroll in the HOW program? - [ ] To increase construction costs. - [ ] To avoid legal responsibility. - [x] To attract buyers by offering additional security. - [ ] To meet government requirements. > **Explanation:** Builders often enroll in the HOW program to provide home buyers with additional security and confidence, thereby making their offerings more attractive in the market. ### Which period typically covers workmanship and materials defects under the HOW? - [x] One year - [ ] Two years - [ ] Five years - [ ] Ten years > **Explanation:** The coverage for workmanship and materials defects typically lasts for one year under the HOW program. ### Can a homeowner extend the coverage of their HOW? - [x] Yes, via extended warranties. - [ ] No, it cannot be extended. - [ ] Only if mandated by the state. - [ ] Only by purchasing a new HOW policy. > **Explanation:** Homeowners can extend their coverage by purchasing extended warranties that go beyond the standard HOW terms. ### What type of defects are often excluded from the HOW program? - [ ] Major structural defects - [ ] Mechanical system failures - [x] Cosmetic and natural disaster damages - [ ] Plumbing issues > **Explanation:** Cosmetic issues and natural disaster damages are often excluded from the HOW program coverage. ### What is the purpose of the Homeowner Warranty Program? - [ ] To increase property taxes - [ ] To facilitate home loans - [x] To protect homeowners from structural and mechanical faults - [ ] To enhance property value artificially > **Explanation:** The primary purpose of the Homeowner Warranty Program is to protect homeowners from structural and mechanical faults in their newly constructed homes.

Thank you for delving into the intricacies of the Homeowner Warranty Program (HOW) and tackling these informative quiz questions. Continue to build a solid foundation of knowledge in real estate protections!