The definitive guide to structural warranties (Part 1)
Every home you build must meet certain standards. Buyers, bureaucrats, and your reputation demand that you meet those standards with every single house you build. But meeting those standards can be challenging. Soil movement, framing issues, improperly compacted fill material, and more can cause structural defects for even the most conscientious builders. But smart, successful builders know that a structural warranty from 2-10 Home Buyers Warranty (2-10 HBW) speaks to these issues.
In this article, we’ll focus on some foundational information about structural warranties:
- What a structural warranty is
- What a structural warranty covers
- The causes of structural defects
The average structural claim costs between $42,000 and $113,000, on average. Knowing what a structural warranty is, what it covers, and the most common causes of structural defects can help you avoid the issues structural defects can cause for you and your buyers.
What is a structural warranty?
A structural warranty is a written agreement between you and your buyer. It clearly defines your work-product obligations related to construction quality and any continuing obligations you may have to your buyer.
Why does defining obligations matter to builders?
Clearly defining your obligations as a builder is crucial to protecting your reputation and your bottom line. Without a structural warranty’s clearly defined performance standards, you’re at the mercy of implied warranties.
Every state recognizes implied warranties. In terms of home building, implied warranties require you, by law, to abide by certain workmanship and habitability standards in the homes you build. The problem is that these implied warranties aren’t standardized. Implied warranties are subject to vague and unpredictable court decisions, which can make it exceedingly difficult to abide by them. And yet, you must.
A structural warranty defines those obligations and provides an express, limited written agreement between you and your buyers. This supersedes implied warranties and puts you back in control of knowing what you’re responsible for.
What does a typical structural warranty do?
In a typical structural warranty agreement, the home builder guarantees that their newly built homes will be free from qualified structural defects for 10 years. You can also purchase additional coverage to cover workmanship and systems.
Structural warranties protect you, your company, and your buyers against structural defects that arise after you’ve finished building. These structural issues may not be apparent until many years after the sale of the home.
A structural warranty from 2-10 HBW can give you and your buyers confidence. Because the 2-10 HBW structural warranty is insurance backed, if qualified structural defects occur, the warranty insurer—rather than you or your buyer—is responsible for the cost of any structural defects. This is a significant bit of coverage, since the average cost to address a single structural claim ranges from $42,000 to $113,000.
How common are structural defects?
Structural defects are more common than most builders and buyers realize. In parts of the United States that have expansive soils, 25% of all homes may experience some form of structural distress over their lifetime. Up to 5% may sustain major structural damages.
And even builders with an excellent history of no structural defect claims can suffer. Approximately 56% of structural claims come from home builders who had never had a claim against them before.
What does a structural warranty cover?
A structural warranty covers specific types of structural defects. Specifically, a structural warranty covers actual physical damage to load-bearing elements of a home that result in their failure to function, rendering the home unsafe, unsanitary, or otherwise unlivable. In fact, 2-10 HBW was the first company to define these three U’s. We did so for the sake of transparency and to establish coverage expectations so that builders and buyers don’t have to wonder what qualifies as coverage.
A structural warranty typically covers the following load-bearing elements of a house:
- Footings and foundation systems
- Beams
- Girders
- Lintels
- Masonry arches
- Columns
- Load-bearing walls and partitions
- Roof framing systems
- Floor systems
There’s a good reason why the language in a structural warranty is so specific about what it covers. The specific terms of what’s covered in a structural warranty ensure that no one is paying for frivolous claims. That saves you time and money, and lets you do what you do best—build quality homes.
As the leading structural warranty provider in the US, 2-10 HBW offers structural warranty coverage starting on the day the home closes. That means you and your buyers are not responsible for the costs or repairs caused by structural defects from Day 1 onward. Some companies, however, don’t provide coverage until the third year after closing. In that instance, if the symptoms of structural defects occurred in Years 1 or 2, you would be responsible for repairing and paying to address the issue.
Are there things a structural warranty doesn’t cover?
Yes, there are things a structural warranty won’t cover. For example, a structural warranty doesn’t cover structural damages from natural disasters like tornadoes and hurricanes. Damages from a natural disaster may be covered under a homeowners insurance policy.
Some warranty plans, like the 2-10 HBW structural warranty, cover structural damage to detached garages if they were part of the home’s original construction. If a builder adds a detached garage after the original construction is complete, the structural warranty would not apply. Instead, the new detached garage would be considered a remodel, and you’d need a 10 year structural home improvement warranty.
Causes of structural defects and damage
Though there are seemingly endless causes for structural defects and damage, it boils down to two overarching causes.
- Soil movement
- Framing issues
Soil movement surrounding a home’s foundation causes 80% of structural defects. Framing issues cause the remaining 20%.
The problem of soil movement
There are two types of soil movement that damage homes: heave and settlement. Active soils cover more than 50% of the US and are responsible for more property damage to homes than floods, earthquakes, hurricanes, and tornadoes combined.
For example, clay in active soil expands when exposed to moisture and contracts when conditions are dry. These changes occur regularly as season and drought conditions change. In short, even though soil movement is outside your control as a builder, you’re still responsible for addressing structural issues caused by soil movement.
Industry construction standards suggest that builders design homes to move no more than one inch as they settle. However, swollen soil underneath a home can move a whole house six inches or more, with basements moving as much as 12 inches. Because the movement underneath the home’s foundation is not uniform, it can cause serious damage to the structure as a whole.
Improperly compacted fill material is another common problem related to soil movement. When improperly compacted, the weight of the house can compact the fill material and cause settlement. Failure to follow geotechnical recommendations or a lack of supervision during fill placement can result in settlement damage. For more information, read our article about issues with structural fill.
Knowing what a structural warranty is, what it covers, and what causes structural defects can help you keep your buyers safe and happy. After all, 94% of prospective buyers say that they’re more likely to buy a house from a builder who offers a third-party structural warranty.
Next, we’ll take a deep dive into the benefits you and your buyers can experience with a structural warranty. We’ll also look at the process of filing and resolving a structural claim. Read Part 2 here!
Learn how you can protect your business and add valuable selling points to your new builds with a 2-10 HBW structural warranty.
