Builder’s Bankrupt – What about the Warranty?

If I’m wrong, please correct me in the comments.

This is not specific real estate advice but a thought I had recently. With some of the local builders struggling, what happens to the one year builder warranties and other, longer warranties?

Everything I have read to date and the answers I have been given leads to this answer – Sorry. Other than personal promises, once the builder’s gone, so are the warranties – implied and otherwise.

I haven’t found a more succinct explanation that Ilyce Glink’s at Inman News (no longer available) –

Please talk with a good real estate attorney who has experience with new construction contracts. You’ll want to review what was promised to you in terms of the warranty. Then, have your attorney contact the builder to see what’s going on.

What you may find, in the current economic climate, is that the builder is either bankrupt, has gone under or slowly going under. If the builder goes out of business, your warranties from the builder will likely be worthless. However, there may be underlying warranties from the materials manufacturers that may protect you somewhat. These manufacturer’s warranties might include the windows, the heating and cooling systems, plumbing fixtures, roofing materials and some other components installed in the home.

Here’s my thought – get a good home warranty. I’ve recommended several to clients before, one of them is AHS.

In this world, a home warranty may be better than nothing – heck – if you’re buying new, get the builder to buy several years of a home warranty for you.