How does a building warranty add value to a property?
Despite the negative impacts of the COVID-19 pandemic, more people than ever are searching for new build homes. The WhatHouse? New Homes Index reveals a 68% increase in the first three months of the year, compared to the same period in 2021 – with the 30% increase in March 2022 being the highest jump in demand for new builds since before the pandemic started two years ago.
Usually, first-time buyers have more interest in new build properties because they have the latest specs – meaning energy efficiency and all the modern conveniences. They also tend to come with a building warranty that guarantees financial protection if something goes wrong with the structure.
Nobody really expects new build homes to end up being defective. After all, with ever-stricter safety regulations for the construction industry, why would a modern building develop structural faults?
While some developers and builders might intentionally cut corners and risk causing latent defects, most will do their best to ensure everything is up to standard – but mistakes can still happen. If an accidental error is overlooked during construction, unexpected problems can develop down the line.
This is where a structural warranty comes in. The risk of having to pay for repairs to a building that you’ve already invested a lot of money into might put anybody off buying a new property. However, there are at least three major reasons why a building warranty eases this fear, making new builds more attractive to potential buyers. Here’s how these policies add value along with peace of mind.
1) Protects your budget and future profits
Building a new home from scratch is a big investment, whether it’s a single dwelling or a larger housing development. The more money your business and its investors put into such a project, the more insurance you’ll need to make sure it doesn’t all go to waste if the worst should happen.
Many mortgage providers make it a condition that the property must have an appropriate building warranty in place, as do any lenders financing the actual construction. There’ll be a long trail of liabilities with so many people and elements involved, so you’ll need to cover every eventuality.
If you intend to secure funding for the build, or want to attract a larger pool of buyers who can finance their purchase with a mortgage, then this coverage should include a structural warranty.
This might sound like an unwelcome extra cost on top of the expense of building new homes, but it’s actually a budget-saver. Paying for the warranty, and even carrying out work you’re liable to fix yourself after a claim, is likely to be far cheaper than a court case (not to mention less damaging to your reputation). The cost of repairing latent structural damage can run into thousands of pounds.
If you want to stay on budget, and attract fiscally responsible buyers, a building warranty can help to ensure that your development is profitable. It also removes liability from your shoulders as the builder/developer after 2 years from completion, passing it to the warranty provider from then on.
2) Improves trust by providing third-party validation
Being able to show that you already have structural protections in place can go a long way in convincing prospective buyers that your property is the best choice for them. Having a building warranty ready to transfer to the buyer helps to build trust between you, for three reasons:
1) You’re demonstrating your commitment and confidence in the quality of your work.
2) Their home and investment are protected by a professionally vetted scheme.
3) There are provisions for what will happen in the event of a latent structural defect.
If a recognisable and industry-leading warranty provider is willing to back up your work, this third-party validation could be the last bit of persuasion your buyer needs to commit to the purchase.
Think about it. If you wanted to buy a new phone, for example, you would search online to compare providers first. Would you choose the one with a contract endorsed by an accredited third party, or one that wasn’t? Most people will go with the option that offers a safety net, trusting the provider that thinks ahead and offers a plausible route for redress in case of issues like structural defects.
3) Sets expectations that guide buyers
As an extension of the second point, the existence of a building warranty could instil enough confidence in your work to clinch the sale. Any buyer will want to know that you’ve dotted the ‘i’s and crossed the ‘t’s when it comes to completing construction to a high standard, and that you can provide a backup plan for them in case a previously undiscovered problem becomes unignorable.
Looking over the structural warranty contract will also let them see exactly what they can expect from the policy. Even if they don’t need to use it, it’s good to know that there are steps to follow and designated people to contact to put things right. It should lay out the policy’s specifications – like the ‘who’, ‘why’, ‘when’, and ‘how much’ – to help all parties to understand their legal responsibilities.
This means that buyers should know which structural elements are covered, and be less likely to claim for issues that aren’t included in the policy. Smaller cosmetic problems that might put buyers off are also more likely to be caught and fixed before they can even notice them, as part of the building warranty involves key stage inspections throughout construction to monitor the build.
Should you get a structural warranty?
The expectations for new build houses are much higher than pre-owned/older buildings, with the renewed surge of interest in these properties fuelled by efficiency and up-to-date accommodations for modern lifestyle concerns. If you want your developments to hold up to these expectations, you should definitely be applying for a structural warranty for each property at the earliest opportunity.
Clearly defining and supporting your standards by backing them up with a building warranty lets clients and customers know that you speak their language, and care about the quality and long-term results of your workmanship. Even if you’re an individual self-building rather than a small business or corporation, you’ll find that funding projects and selling properties is easier with the right warranty.