Home Owners Warranty Corp.'s experimental program for rehabilitated homes in the District still has no participants, largely because of a decline in housing activity here, officials of HOW say. The program, which would provide buyers with warranty protection against defects, was reactivated last December after an earlier aborted attempt.
Warranties under HOW's new-home program are offered by more than 300 Washington-area builders, including 13 in the District. The cost of the warranties is usually passed on to buyers in the purchase price. The participating builders are required to buy warranty coverage for every new structure.
Eligible for the new rehabilitation program are single-family houses and condominiums in buildings no taller than four stories. The structures must have been substantially rehabilitated by HOW-approved builders. In addition to standard HOW approval, builders wishing to participate in the pilot plan must have five years experience in homebuilding and must demonstrate some expertise in restoration in addition to meeting standard HOW requirments.
Although Washington builders "clamored" for a rehabilitation program when the idea was first proposed in the late 1970s, there have been no takers because the current District housing market is "moribund," said HOW spokeswoman Jane M. Snow. Rehabilitation work and the sale of restored housing have ground to a halt, she said, noting that the continued rise in interest rates and the concurrent drop-off in all home sales in the area.
The program's enrollment option may be another factor holding it back, Snow said, noting that beleagured builders are reluctant to tack additional costs onto already inflated home prices. In addition, since few buyers are aware that the rehabilitation warranties are available, they don't ask the builder to supply them, she said.
"Even though builders don't like to use the word 'depressed,' our markets aren't what we'd like them to be," said Frank Calcarra, a HOW builder who has done extensive rehabilitation work in the District since the 1950s.
Builders involved in restoration "fought" to get the program going, Calcarra said, adding that he expects a "tremendous" increase in rehabilitation work and heavy use of the program "as soon as the markets open up."
Before a warranty will be issued under the program, a structure must be inspected three times--once at the outset, after installation of electrical and mechanical systems and, finally, after work is completed. Builders pay a premium of $3.75 per $1,000 of the sale price for the coverage.
Buyers receive the same 10-year protections HOW has offered to purchasers of new homes since it began operations as a subsidiary of the National Association of Home Builders in 1973.
The coverage includes:
* Full protection in the first year against any structural defects--including those stemming from poor workmanship or faulty materials--and defects in the electrical, heating, cooling or plumbing systems; pools, driveways and detached garages are excluded.
* Protection in the second year continues against major structural defects and poor performance levels of mechanical or electrical systems, but not the equipment itself; workmanship and materials are no longer covered.
* Protection during the last eight years is limited to major structural defects.
The builder pays for repairs during the first two years; HOW is reponsible for repair costs for the balance of the warranty. HOW also pays during the first two years if the builder defaults on its obligation.
HOW arranges for settlement of disputes between builders and buyers by an impartial third party; the decision is binding on the builder, but the buyer still may take the case to court.
The pilot insurance plan was established originally in 1980 to provide protection for home buyers only in the District, but it ended soon after it began when the insurance carrier withdrew from the program, Snow said. No coverage had been issued at that time, she said.
The insurer, INA Underwriters Inc., based its action on an assessment that the financial "risk was too great" three years ago, Snow said. She said that fluctuations of the economy have leveled off to some extent and that the program now is insured by a group that includes INA.