WHY HOME/BUILDER WARRANTIES COMPANIES WIN
You are buying a newly built home and the builder tells you not to worry about the foundation because if you end up having foundation failure then the home buyers warranty or builders warranty will protect you. Actually getting the warranty company to cover failures can be difficult and costly. Why? Because the language in defining a failure is vague (general) and most of the time the home owner has no historical data to show where the foundation started before it failed. So what can you do help prove movement, have an Original Construction Survey of the floor elevations for your home. A basic structural assessment by a structural engineer before you move it can help document the condition of the building but an Original Construction Elevation survey is of added value to document foundation performance.
Who can I get to help me develop an Original Construction Survey?
A-1 Engineering, LLC has the technology, staff and know-how on recording the elevation readings and exhibiting the readings on a floor plan. Each Original Construction Survey is signed and sealed by a Texas Licensed Engineer. The fee for the survey varies by building size. Call our office for an actual fee for your house.
Some home buyer warranties say they cover structural failures following HUD guidelines. This sounds official, but here is what HUD says:
· Structural damage is the actual physical damage to the designated load-bearing portions of a home caused by failure of such load-bearing portions that affects their load-bearing functions to the extent that the home becomes unsafe, unsanitary, or otherwise unlivable. Load-bearing components for the purpose of defining structural defects are defined as follows.
· Footing and foundation systems; beams; girders; lintels; columns; load-bearing walls and partitions; roof framing systems; and floor systems, including basement slabs in homes constructed in designated areas (see Sec. 203.207) containing expansive or collapsible soils.
· Damage to the following non-load-bearing portions of the home is not considered a structural defect: Roofing; drywall and plaster; exterior siding; brick, stone, or stucco veneer; floor covering material; wall tile and other wall coverings; non-load bearing walls and partitions; concrete floors in attached garages; electrical; plumbing, heating, cooling and ventilation systems; appliances, fixtures and items of equipment; paint; doors and windows; trim, cabinets, hardware, and insulation".
Reading the definition of structural damage, as defined by HUD, is very vague and allows warranty companies to pass judgement on the condition of your foundation based on the perspective of THEIR engineers and underwriters without clear parameters, guidelines, criteria or evidence. In other words, the Warranty Company decides when your home has structural damage based on their underwriter’s perspective. Read the definition again. Notice it says that that a damage is covered when the building becomes unsafe or unlivable. Who decides when its unsafe or unlivable? Their engineer? Maybe their underwriters? What criteria is used to decide that? What may be unsafe to you, maybe safe to someone else.
The logical answer would be that the Building Code would help define what is safe BUT MOST WARRANTY COMPANIES DO NOT CONSIDER OR APPLY THE BUILDING CODE in the evaluation UNLESS THE WARRANTY DOCUMENTS OUTLINE IT IN THE CONTRACT. Most Warranty Documents have a section that discusses Damage to Major Structural Components.
You will need to check with your state or an attorney if that is legal or not; but if the warranty documents simply say that they evaluate the home per HUD standards, then the vague and general criteria is what gets considered by the warranty to cover the damage. We are not saying its fair or unfair, right or wrong, just be aware of the conditions in your contract with the warranty company.
Having historical information on the condition of house from the time of construction or from the time that you move in to the time that you suspected issues exist helps prove that damage to the building has become substantial.
What can a home owner do to help prove foundation structural failure?
Good record keeping will help. Here is a suggested checklist that can be considered when buying a brand new home:
Fully read and understand what type of home owners warranty you have. Do your research. Be sure you fully understand what is covered. More importantly, figure out what criteria they use and consider if it is clear. There a few warranty types, but the most common are:
Builders Self-Insured Warranty (aka, Builders warranty) means the builder obligates themselves or has a self-insured warranty to cover your foundation. Larger builders might have this type of warranty coverage. Texas is a special place in that builders are liable for their construction for 10 years after substantial completion of the house. However, if the builder goes out of business then so does the warranty. Builder Insured Warranty (mentioned above) is more expensive but is more likely to provide continual coverage to 10 years in case the builder goes out of business.
Be very familiar with the 1 year, 2 year and 10 year performance requirements. Follow the process for reporting issues and pay attention to the dates and timelines.
Get a static plumbing leak detection test. Yes, it costs you money BUT IT CAN SAVE YOU THOUSANDS IN UNDETECTED LEAKS. Newly built homes get leaks just the same as older homes. If the reports says that there are no leaks, then great. BUT, if the report says that you have a leak or poor drainage in the plumbing lines, then someone needs to get that fixed before it effects the foundation.
Get an Original Construction Elevation survey. An Original Construction Elevation survey is not the same thing as the survey of your property when you buy it. It is a separate survey of just the building. It is a survey of the floor plan with numbers that show the elevations of the floor. The numbers may not mean anything now, BUT IF YOU START SEEING CRACKS AND HAVE ISSUES DOWN THE ROAD, YOU NEED TO PROVE TO THE WARRANTY COMPANY THAT THE FOUNDATION HAS MOVED. Having the Original Construction Survey sets the baseline of the floor now for future use. The survey does cost you some money BUT THE INFORMATION IS PRICELESS IF YOU ARE TRYING TO TRACK THE PERFORMANCE OF THE FOUNDATION.
For example, 2-10 Home Buyers Warranty Appendix C discusses when a foundation is considered to have failed to meet an acceptable performance. If you have a 2-10 Warranty, open the booklet and go to Appendix C. Notice the Warranty booklet says that calculated movement is to be compared to the Original Construction Elevations BUT if you do not have one, then the Warranty company get 0.75 inches (three-quarters of an inch) in additional tolerance. Your foundation may have moved 1-inch (with cracks and breaks) but if you do not have the Original Construction Elevations, then the Warranty company can claim that your foundation only moved 0.25 or (1-0.75) inches. A quarter of an inch is not much movement and will likely meet their standard so you are left holding the bag on repairs.
· Take pictures of the exterior of the building and property before you move in.
· If you see the house being constructed, take lots of pictures during your visits.
· If you happen to see the foundation plans for the house, take a picture of it.
· Ask for an accurate copy of your specific floor plan. Some builders will give you a generic floor plan and hand write the changes. The specific floor plan is needed to accurately record the Original Construction Elevation survey.
· Make copies of all of your docs and convert them into PDF to share them and protect them.
· Double and triple check with the City Building Official on the status of the building permit for the house. Some builders fail to close vital permits for the house. Sometimes, the permit can not be closed because of failed inspections. You can check the status on line or visit the office. We always suggest to trust-but-verify. Trust the builders word that they closed the permits but verify it by seeing it for yourself.
Keep in mind that having these documents does not suggest that you will benefit in a claim but it is a lot easier for you to prove issues with the foundation when you have historical data that tracks the performance.
What if I want to sell my house during the covered 10-year warranty coverage period?
Having these documents might clear up a lot of questions by the new buyer on the condition of the foundation. Transferring ownership of the house without plumbing leaks and Original Construction Elevations helps the new buyer to continue to protect the house.
This discussion is not engineering consulting or guidance. The discussion is just for information purposes and to encourage you to research the role and responsibilities of warranty companies and other parties. As always, we suggest that you consult with professionals on your transactions, purchases, contracts and real estate deals.