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Market Perspectives Blog Post

The Importance of Home Warranties: Why Texas Builders Should Offer Them

Homebuyers seek warranties to ensure protection against construction defects, providing peace of mind and financial security. A home warranty can become essential in the home buying process as they cover potential issues with workmanship, materials, and major structural components. These warranties also serve as a competitive advantage for builders, setting a standard in the industry.

The average cost for structural repairs can be substantial, though costs can range widely depending on the severity and type of repairs needed. For example, basic structural repairs might cost around $5,000, while more extensive repairs, such as lifting a foundation, can run between $20,000 and $23,000. Consequently, having insurance coverage for these potential expenses is crucial for homeowners. The high cost of repairs underscores the importance of comprehensive warranties and the financial protection they offer, making them a vital aspect of real estate transactions.

The cost of providing 1/2/10 home warranties varies based on several factors, including the number and average value of homes built, the reputation and history of the builder, and the specific area. Generally, warranty costs range from $300 to $600 per home per year, influenced by the builder’s track record and the overall volume of homes covered. One of the largest providers estimates costs at approximately $3.50 per $1,000 of home value. Larger builders with a positive reputation may benefit from lower rates due to economies of scale and lower risk assessments by warranty providers.

By offering a new-home warranty on every home you sell, you communicate to your buyers that you build a quality product and stand behind your work. This creates buyer confidence and results in a quicker sale and more satisfied customer. And, as buyers are becoming more savvy about home buying and their builder options, choosing a builder that offers warranty protection is becoming a more common requirement.

In June 2023, Texas updated its statute of repose, reducing the period during which buyers can sue builders for construction defects from ten years to six years. This change applies to detached one- and two-family homes and townhomes, provided the builder issues a written warranty meeting specific terms: one year for workmanship and materials, two years for plumbing, electrical, heating, and air-conditioning systems, and six years for major structural components.  While this may eventually make a 1/2/6 warrantee more common, current listings seem to show Builders sticking to the 1/2/10.

Home warranties are a crucial aspect of the home buying process in Texas, providing buyers with confidence and financial protection. The recent changes in the statute of repose emphasize the importance of offering robust warranties. Builders who provide comprehensive 1/2/10 warranties not only meet legal requirements but also stand out in the market, attracting more buyers and ensuring higher satisfaction.

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The Importance of Home Warranties: Why Texas Builders Should Offer Them

Homebuyers seek warranties to ensure protection against construction defects, providing peace of mind and financial security. Warranties become essential in the home buying process as they cover potential issues with workmanship, materials, and major structural components. These warranties also serve as a competitive advantage for builders, setting a standard in the industry.

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We don’t just buy and sell homes. We build community by helping clients find their place in the world.

Timothy Powles and Adam Stanley work together on the Adam Timothy Group at Compass RA and manage AT Real Estate Group LLC, a rental and vacation property investment business. We are about building community. We believe a real estate transaction is an important and extremely significant event but relationships last a lifetime. Our clients, partners, and friends trust us to get to know their story and what is most important to them.  And we work tirelessly to retain that trust.

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