It’s hard to remember a time when you bought a car without a warranty. While a car makes up a significant portion of any household’s expenses, a home is for most people the largest purchase they will make. And yet homes are bought without warranties.
You might think that the law protects the buyer from a seller’s failure to disclose defects. But enforcing your legal rights is expensive and time-consuming. For a new homeowner, time and money are the two things that will be in scarce supply when the roof is leaking and the trusses are giving in.
Even if you can prove to a court that the seller knew or should have known about the defect, the harsh reality is that the seller might not have the cash to meet their liability.
“When designing this product, we were acutely aware of the uninsured losses on standard homeowner’s insurance products and customer disappointment when discovering that defects to the building were not covered,” says Lee-Ann Dobrescu, Head of Group Business Development at Hollard. “Although we did consider offering a liability product that would protect sellers we soon realised that a warranty product would respond far quicker. Our goal was to meet the need and exposure faced by our customers on both sides of a property transaction, either when buying or selling a home.”
So why sell or buy a home with a warranty?
“Our extensive consumer research shows that buyers love it. It’s all about peace of mind, which is something mostly absent when buying a home. Given the financial quantum, it is up there in the list of most stressful things you can do,” says Simon Griffiths, co-creator of the product. “Like car manufacturers who compete on the terms of their warranty, home sellers are competing for the attention of buyers. A warranty is a significant way to differentiate your home, attract more buyers, speed up the selling process and ensure the home sells for the best price it can attract.”
We all know people with stories of what went wrong after the transfer. Some can have a laugh about it when standing around the braai, but sadly for many these unforeseen expenses can have disastrous results. Most defaults on home loans take place within the first two years of taking the loan. In order to get the most home they can afford buyers are stretched to the maximum. Even though they may have made adequate provision for all the associated costs of buying a house, very few have the latitude to cope with the cost of fixing the house. Nothing like collapsing roof trusses or gaping cracks to take the shine off your dream home.
“With all the horror stories around, selling to buyers on fear would be easy,” says Lee-Ann. “But it isn’t Hollard’s style. We prefer to market the benefits to sellers and buyers and have a positive impact on the property environment as a whole.”
Wondering if only perfect homes qualify?
Most homes have some issues that need fixing, and research shows that buyers are happy to make some small repairs. All they want is some certainty so they can plan and budget accordingly. After an inspection has been conducted on the home, Hollard will make a decision on whether or not to grant a warranty. Where the problem is significant, the warranty will be declined. But where there are minor defects these will be listed and excluded under the warranty. The certificate is then issued by Hollard confirming that the house has qualified for a warranty. This certificate can form a part of the offer to purchase and the seller’s disclosure of existing defects.
Some seller’s may choose to have these defects repaired. Here Hollard will provide access to their panel of repairers who have been vetted for the quality of their work and their pricing. Hollard will manage the process to ensure that the work gets done.
Then there is the ever-growing list of compliance certificates required by regulation. These can be electrical, gas, plumbing, borer beetle and electric fence. Again there seems to be some misalignment in the process. The certificate is acquired and paid for by the seller, but certifiers and repairing contractors are often one and the same. This creates a conflict of interests.
When questioned on this issue, Lee-Ann responded, “From a risk management point of view, and for the benefit of both the buyer and seller, we thought it prudent to improve this process. Our panel of contractors will operate on the basis that the certifying contractor will not be the one who does the remedial repairs. We will also take all the necessary steps to ensure that the contractors are competent. After that we will be on the hook for anything that goes wrong.”
There are of course terms and conditions, the most significant of which is that general wear and tear and day to day maintenance are not covered, as well as the defects already identified and excluded. The policy wording is written in a way that everyone can understand. The aim is to ensure that buyers have protection for two years from the date of transfer which will give them enough time to get used to their home, settle in and enjoy the best of it. Hollard will take care of the rest.
Until next time.
The InsuranceFundi Team