Warranty's pay only 1% of claims
  BUILDER Magazine
  Risk Retention
"I don't believe in them," says Ron Barney, vice president of Trend Homes, a 900-unit builder in Chandler, Ariz. "It's an appeasement to homeowners that really doesn't do anything for them. I have a problem wasting money like that." ... 10-year structural warranties is that their narrow and vague policy language excludes most homeowner claims or common residential construction problems, from drywall cracks and nail pops to more severe issues of foundation fissures and beetle-infested framing.

In fact, the warranty industry pays claims on only about 1 percent of the homes covered by such policies. "They're in the business of collecting fees and not paying claims," says Jack Dorwart, manager of Holladay Group in Lakewood, Colo., which will close about 40 homes this year--all with insurance-backed, 10-year warranties to pacify buyers. "For the types of things a homeowner wants [covered], there's always an excuse [to deny the claim]."  Even those in the industry admit their policies are limited. "Most construction defect lawsuits don't fall under warranty protection," says Wallace "Em" Fluhr, CEO of 2-10 Home Buyers Warranty (HBW) in Atlanta,  Read more...

Introduction
In November of 2000 the attorneys representing Centex Homes in Centex Homes v. Buecher in the Texas Supreme Court, referred to the quality of their "Expressed Warranty" of  the Residential Warranty Corporation, provided by Centex Homes. They argued that an implied warranty of habitability wasn't required since the owners were provided a detailed, quality, expressed warranty. 

The 10 year warranty has always been a selling point for the builders. The "Ten Year " has a confidence building ring to it. but gives the homeowner a false sense of security. Homeowners expect a bumper to bumper warranty much like cars. Many car warranties cover at the very least 4 years 60,000 miles and with the quality of cars of today, an extended warranty is rarely needed. Home warranties on the over hand have a 1-2-10 year warranty. The 10 year applies ONLY to Major Structural Defects (MSD). Most everything else, roof shingles, windows, siding, carpet, tile, bricks, etc. have only 1 or 2 years warranty. The owners are given a false sense of security when in fact the warranties are severely limited.

HOBB has obtained a copy of the RWC, the Residential Warranty Corporation, and provides this review of the more interesting points of this warranty. 

Binding Arbitration. 

• All unresolved warranty issues must be resolved with mandatory and binding arbitration. 
• You must pay the arbitration fee before the matter is submitted to the arbitration service.
• The decision of the arbitrator shall be final and binding upon all parties 
• Simply put, you cannot file a lawsuit

Conditions of Warranty Performance

• If your builder defaults in its warranty obligations, the administrator will process the request for warranty performance provide you pay a warranty service fee of $250 for each request Years 1 & 2
• In years 3-10 you must pay the administrator a warranty service fee of $500 for each request
• It costs money to get warranty service when your builder defaults

Consequential Damages.
This warranty does not cover consequential or incidental damages. Example: If your roof was installed incorrectly, and while you were out on vacation a 3 day rain storm drenched the interior of the home, only the repairs to the roof will be covered. Any damage to belongings, furniture, carpet, your family tree photo album, etc would not be covered. The roof is covered for only 1 year.

Major Structural Defects (MSD). 
MSD is the ONLY thing warranted in the 10 year warranty after the first 2 year period. All of the following conditions must be met to constitute a major structural defect: 

• Actual physical damage
• Causing the failure of the specific major structural components and 
• It materially affects the physical safety of the occupants of the home. 

These restrictions account for why many homeowners with cracks running the length of their homes in their foundations are surprised the warranty does not cover them. Walls, as a result of these cracks, are not covered. Reoccurring cracks in walls are not covered. Doors sticking, not covered. None of these fit the definition of MSD.

What is NOT covered in the 10 year warranty after year 2:

• non load bearing walls, walls not supporting the roof or structure of the house
• tile, tile cracking from the foundation moving
• plaster
• drywall
• flooring, subflooring
• brick, cracking from foundation movement
• stucco, cracking, leaks
• siding, coming apart, or failing as in Masonite siding
• roof shingles
• heating/cooling systems
• appliances
• doors, trim
• paint and stains

Incomplete Building
If your builder fails to complete any part of the Home that is reasonably foreseeable to cause structural damage to the home, then it is your responsibility to complete such parts of the home to avoid the structural damage. If you fail to complete the work, then any resulting structural damage is not covered under this limited warranty. 

Warranty Exclusions. (There are 37 specific exclusions including)

• Loss or damage 
  • Caused by soil movement (Houston gumbo)
  • Water which backs up from sewers or drains
  • Water below the surface of the ground
  • To wiring
• Loss o damage resulting from, or made worse by:
  • Intrusion of water into crawl spaces 
  • the presence of hazardous or toxic materials resulting in uninhabitability or health risk within the home.
  • Your failure to minimize or prevent such loss or damage in a timely manner
  • Quality and potability of water
• Failure of your builder to complete construction of the home
• Any consequential damages
• Personal property damage or bodily injury
• Violation of applicable building codes
• The removal and/or replacement of items Ösuch as wall paper, where removal and replacement are required to execute a repair.
• Sound proofing between rooms or floors

 There are limitations in the warranty such as:

• An out of square wall (it is not a defect)
• Wood twisting, warping or splitting is normal due to exposure to the elements
• Wood door panel shrinks exposing unfinished surfaces
• Cracks in stucco exceeding 1/8 inch will be patched 1 year warranty only Hairline cracks are common
• Paint or peels or deteriorates. 1 year warranty only
• Condensation or clouding of panes in windows. 1 year warranty only
• Excessive drafts and leaks. It may be necessary for the owner to have storm windows installed
• Cracks in ceramic grout joints. Builder will repair one time only. 1 year warranty only
• Carpets fades, stains or discolors. Builder will fix prior to occupancy. No warranty.
• Premature wearing of carpet. No action required.

Conclusion
The expressed warranties are chock full of exclusions and loopholes giving the illusion of a bumper to bumper warranty for the home, much like a car. The "Ten Year" warranty is deceiving and requires someone with more intelligence than a rocket scientist to understand.