US new-build homes: builder warranties and the federal rules

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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A newly built home in the United States comes with a promise from the company that built it. How long that promise lasts, what it leaves out and who stands behind it are set mostly by the builder's own document and by state law, which this guide does not cover. Around that contract sit a handful of federal rules, each with a narrow job, and they are easy to mistake for one another.

This guide sets out the federal layer as read in October 2026. It covers what the Federal Trade Commission says a builder warranty usually contains, how far the federal warranty statute reaches into a new house, the completion warranty form used with loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA), what the Real Estate Settlement Procedures Act (RESPA) allows when a builder points buyers to its own lender, and, briefly, the Interstate Land Sales Full Disclosure Act. It describes general rules. What applies to one purchase depends on the contract, the loan and the state.

Typical builder warranty periods as described by the Federal Trade Commission in its consumer advice on warranties for new homes, published in May 2021 and read in October 2026.

Two kinds of cover with similar names

The Federal Trade Commission's consumer advice on warranties for new homes starts by separating two products that sales conversations tend to blur. A builder warranty, in the commission's description, comes with new construction or a remodel and covers permanent parts of the home, such as concrete floors, plumbing or electrical work. A home warranty is something else: the commission calls it a service contract that costs extra, usually applies to existing homes and covers items such as appliances or air conditioning systems.

The commission states that service contracts are not warranties. It lists three ways they can disappoint: they may duplicate the warranty that already comes with a product, cover only part of it, or make repairs hard to obtain.

The commission also notes who can stand behind a builder warranty. Builders may back the warranty themselves, or buy it from an independent third-party company.

What the FTC says a builder warranty covers

The commission describes coverage in three layers, by length. The first lasts one year and covers workmanship and materials on most components; its examples are siding and stucco, doors and trim, and drywall and paint. The second lasts two years and covers heating, ventilation and air conditioning, plumbing and electrical systems. The third applies only with some builders: cover of up to 10 years for what the commission calls major structural defects, described as problems that make a home unsafe.

These are typical periods, as the commission presents them, and no federal rule read for this guide fixes them.

The exclusions are as important as the periods. The commission lists four kinds of cost or item that builder warranties generally leave out:

• out-of-pocket expenses caused by a major defect or a warranty repair, such as the cost of living somewhere else while the work is done;
• household appliances;
• small cracks in brick, tile, cement or drywall;
• components already covered by a manufacturer's warranty.

A worked example shows how the layers expire, on the assumption that a builder's warranty follows the commission's typical periods exactly and runs from the closing date. For a home that closes on 16 March 2026, the workmanship layer would end on 16 March 2027 and the systems layer on 16 March 2028. A paint defect reported in May 2027 would fall outside the first layer, while a failed furnace circuit reported the same month would still sit inside the second. The actual start date is whatever the warranty says, which is why the assumption is stated.

Where the Magnuson-Moss Act stops at the front door

The Magnuson-Moss Warranty Act is the federal statute on written warranties for consumer products. A house is real estate, so the question is which things inside a new house count as consumer products. The Federal Trade Commission answers it in its interpretations of the Act, in section 700.1 of title 16 of the Code of Federal Regulations, first issued in July 1977 and last amended in July 2015.

The starting point is broad. The Act covers written warranties on tangible personal property normally used for personal, family or household purposes, and the interpretation says this includes property attached to real property. It adds that "any ambiguity will be resolved in favor of coverage."

Then comes the line that matters for new homes. Paragraph (c) says the Act reaches separate items of equipment attached to real property, such as air conditioners, furnaces and water heaters, whether or not state law treats them as fixtures. Paragraph (d) extends this to appliances and other thermal, mechanical and electrical equipment, and says it does not extend to wiring, plumbing, ducts and other integral component parts of the structure. Paragraph (e) deals with building materials: bought over the counter for a repair or a remodel, they are consumer products; integrated into a dwelling at the time it is sold as real estate, they are not. Paragraph (f) applies the same split where a consumer contracts with a builder for a home, a substantial addition or other realty such as a garage or an in-ground pool: the materials fall outside the Act, and the separate equipment attached to the building stays inside it.

Two further details from the same section help to place the Act. Paragraph (g) says section 103 of the Act, on how written warranties are designated, applies only to consumer products that actually cost the consumer more than US$10, excluding tax, and that the same minimum applies to the disclosure rules under section 102. Paragraph (h) says a warranty on replacement parts used in a repair is covered, a warranty that covers only the repairer's workmanship is not, and a written warranty covering both parts and workmanship must comply.

Read together with the FTC's list of exclusions, this explains a pattern buyers meet. The builder's warranty generally leaves out appliances and anything a manufacturer warrants; the manufacturer's written warranty on that furnace or water heater is the document the federal statute governs. The structure itself, including the pipes and wires within it, is outside the Act when sold as part of the home and rests on the builder's warranty and state law.

The FHA and VA completion warranty form

Buyers who finance a new home with an FHA-insured or VA-guaranteed loan meet a federal form that cash buyers and conventional borrowers do not: the Warranty of Completion of Construction, form HUD-92544. The edition read for this guide is dated April 2023. It states that it combines the former form HUD-92544-A and VA Form 26-1859, refers to HUD Handbook 4000.1, and cites section 801 of the Housing Act of 1954 and, for veterans' loans, section 3705 of title 38 of the US Code. It carries an Office of Management and Budget approval number, 2502-0059, with an expiry date of 31 October 2026 printed on the form.

The form is signed by the warrantor, with name and title, and by the purchaser or owner. It identifies the builder and, where a manufactured home was erected, the manufacturer. According to the form, the homebuyer and the builder each receive a copy at closing and one goes into the case binder sent to HUD.

It contains two promises.

The first is about the plans. The warrantor warrants that the dwelling was built in substantial conformity with the plans and specifications, including amendments and changes, on which the FHA Commissioner or the VA Secretary based the valuation of the property. Improvements built by a municipality or another government authority are excluded. The buyer must give written notice of a substantial nonconformity within one year of the original conveyance of title or of initial occupancy, whichever comes first. If the buyer took title before construction was finished, the year runs from completion or initial occupancy, whichever comes first. For improvements whose completion was postponed, the year runs from the full completion of each item.

The second is about quality. The form warrants the home against defects in equipment, material or workmanship for one year from the original conveyance of title, or from the full completion of any item finished after conveyance. It reaches materials supplied and work done by the warrantor or by any subcontractor or supplier at any tier, and the yardstick is acceptable trade practices. The warrantor must remedy a covered defect at its own expense and restore any work damaged in doing so.

A worked example of the first promise, with assumed dates: title to a finished home passes on 1 June 2026 and the buyer moves in on 20 June 2026. The earlier event is the conveyance, so written notice of a departure from the plans would have to be given within one year of 1 June 2026.

Three more points come from the form itself. The FHA Commissioner or the VA Secretary makes the final determination on whether a defect exists and whether the builder must correct it. The warrantor certifies, under penalty of perjury, that the property meets HUD's minimum property requirements and standards or the VA's requirements for new construction. And the form warns that knowingly submitting a false claim or statement can bring criminal and civil penalties, including confinement for up to five years.

Third-party and ten-year plans: what the sources say

This is the point where the sources read for this guide do not line up, and both are shown.

The Federal Trade Commission's consumer advice, published in May 2021 and carrying a page modification date of 26 June 2026, says the FHA and the VA require builders to buy third-party warranties to protect buyers of new homes with FHA or VA loans. It also describes a right attached to such loans, covered in the next section.

Form HUD-92544, in its April 2023 edition, does not mention ten-year plans. The FHA's single family mortgage insurance regulations, in part 203 of title 24 of the Code of Federal Regulations, contain a section 203.14 headed "Builders' warranty", which in the 2025 edition requires an agreement that, if the dwelling is sold within one year beginning with the date of initial occupancy, the seller or builder will deliver a warranty to the purchaser. The contents of part 203 in that 2025 edition, as read for this guide, list sections 203.1 to 203.52, then 203.251 onward; no sections numbered 203.200 to 203.209, the range looked for under the heading of insured ten-year protection plans, appear in the list. That part was read only as far as its first 100,000 characters, so the absence is reported as read and not as a finding about the current rule.

No current VA page on builder requirements could be read for this guide. So the position that can be stated is limited: the joint HUD and VA form sets a one-year warranty; the FTC's page says both agencies require third-party warranties; and the present FHA and VA rules on ten-year plans or on inspections in their place are an open point here.

Making a claim and settling a dispute

The Federal Trade Commission's advice on claims is procedural and short. It can be set out as a sequence.

When a claim is disputed, the route is usually set by the warranty. The commission says many warranties offer or require mediation and arbitration. In mediation a neutral mediator guides the discussion, and nothing is settled unless the parties themselves agree. If mediation fails, the claim usually goes to arbitration instead of court: an arbitrator or a panel hears both sides and issues a decision, and most warranties bar appeals.

For FHA and VA loans the commission describes a wider choice. A homeowner who files against a third-party warranty company can choose arbitration or court, and a homeowner who chooses arbitration is bound by the decision.

On cost, the commission says arbitration is generally cheaper than court but can run to several thousand US dollars, depending on how complex the case is, and that the warranty sets out who pays what. Some builders, it adds, agree to pay the arbitration costs. For further help the commission points to the state or local builders' board, to HUD for FHA-insured loans and to the VA for VA loans.

The builder's affiliated lender under RESPA

Where a builder has a mortgage company or a title company in the same group, RESPA does not forbid the arrangement as such. Its implementing rule, Regulation X of the Consumer Financial Protection Bureau, deals with it in section 1024.15 of title 12 of the Code of Federal Regulations, on affiliated business arrangements. The rule lists a builder or developer among the persons "in a position to refer settlement service business". A separate guide in this magazine covers the same rule from the side of a brokerage that owns a title firm; what follows is the builder's side only.

Under section 1024.15(b), an affiliated business arrangement does not violate section 8 of RESPA if three conditions are met.

1. Written disclosure. The person making the referral gives the buyer a disclosure in the format of the statement in Appendix D of the regulation. It explains the nature of the relationship, including the ownership and financial interest, between the provider and the person referring, and gives an estimated charge or range of charges the provider generally makes. It must be on a separate piece of paper and handed over no later than the time of each referral.
2. No required use. The person referring may not require the buyer to use a particular settlement service provider. The rule keeps one exception relevant here: a lender may require a buyer, borrower or seller to pay for an attorney, credit reporting agency or appraiser that the lender has chosen to represent its own interest.
3. Only a return on ownership. Apart from payments the regulation permits elsewhere, the only thing of value received from the arrangement may be a return on an ownership interest or franchise relationship. The rule says a payment that varies with referrals is not such a return.

The definitions show how close two companies must be to count as affiliated. Control, in the rule, includes holding more than 20 per cent of another person's voting interests or having contributed more than 20 per cent of its capital. A person who fails to give the disclosure can avoid a violation only by proving, by a preponderance of the evidence, that reasonable compliance procedures were in place and that the failure was an unintentional, bona fide error; a mistaken legal judgment about RESPA does not qualify. Documents provided under the section must be kept for five years after execution.

It is worth noting what the regulation counts as a settlement service, because a builder's group may offer several. The definition in section 1024.2 includes originating a federally related mortgage loan, title searches and title insurance, hazard insurance, inspections and home warranties. The same section defines a federally related mortgage loan as a loan secured on residential property with a one-to-four-family structure, and excludes temporary financing such as a construction loan.

Incentives, packages and the true-discount test

A builder may tie a price reduction or a contribution to closing costs to the use of its affiliated lender. Whether that is allowed turns on one definition in Regulation X, "required use", in section 1024.2.

The definition has two halves. A required use exists where a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and will pay for that service or a charge attributable to it. The second half is the carve-out: offering a package or combination of settlement services, or discounts or rebates to buyers who take them, does not amount to a required use.

The carve-out comes with conditions written into the definition itself. Any package or discount must be optional to the purchaser. The discount must be a true discount below the prices otherwise generally available. And it must not be made up by higher costs elsewhere in the settlement process.

The regulation gives no figure for what counts as a true discount, and whether a given offer meets the three conditions is a question of fact. On the text of the definition, an optional, true discount is not a required use, while having to use a particular provider in order to have access to a distinct property is one. The pages read for this guide carried no official commentary dealing with builders by name.

Larger subdivisions and condominiums: the land sales act

The Interstate Land Sales Full Disclosure Act, in chapter 42 of title 15 of the US Code, was written for the sale of lots in subdivisions, and it reaches new housing only at the edges. It is administered by the Director of the Bureau of Consumer Financial Protection. A subdivision, in the Act, is land divided or proposed to be divided into lots for sale or lease under a common promotional plan, and a developer is any person who sells, leases, offers or advertises lots in one.

Where the Act applies in full, section 1703 makes it unlawful to sell or lease a lot without an effective statement of record, or without a property report given to the buyer before signing. The buyer may revoke the contract until midnight of the seventh day after signing, or later if state law gives longer, and for two years from signing if no property report was provided. The same section bars fraudulent practices, including a promise of roads, utilities or amenities that is not written into the contract.

The Act carries exemptions that matter for new homes.

The second row is the one that concerns finished homes and homes under contract to be built: improved land with a residential or condominium building, or land where the seller is obliged to erect one within two years. A condominium unit is defined in section 1702(d) as an improved lot. Units that do not meet the two-year test are still exempt from registration and the property report under section 1702(b), which leaves the anti-fraud provisions in place.

For non-exempt lots, section 1703(d) also requires three things in the contract: a description of the lot fit for recording, a right to written notice of default with 20 days to cure it, and a refund clause. That clause concerns a buyer who loses the lot through default after paying a set share of the price: the seller refunds what remains of the payments after keeping an amount the statute caps by reference to a share of the price or the seller's actual damages. The exact share was not checked word for word against the statute for this guide, so no percentage is given here. The paragraph does not apply where a warranty deed is delivered within 180 days of signing.

Buyers may sue under section 1709, and section 1711 sets limitation periods of three years. The statute text in the 2023 edition provides for a civil money penalty of up to US$1,000 per violation, capped at US$1,000,000 per person in any one-year period, and, for wilful violations, a fine of up to US$10,000, imprisonment for up to five years, or both. Any later adjustment of those amounts was not checked.

What this guide leaves open

Three limits should be plain. The typical warranty periods are the Federal Trade Commission's description of the market, not a federal minimum, and state law on new-home warranties is outside this guide. The current FHA and VA position on third-party or ten-year plans, and on inspections accepted in their place, could not be confirmed from a current agency rule page: the FTC's advice and the 2025 contents of the FHA regulations are reported side by side above. And no VA page on builder requirements was available, so nothing is said here about how the VA identifies or approves builders.

A new home carries several promises at once: the builder's, the equipment makers', and, with an FHA or VA loan, a one-year federal form. Each has its own clock and its own claims address.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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