Product Warranties

9 Months Ended

Sep. 30, 2013

10. Product Warranties

The Company establishes warranty and product liability reserves (“warranty reserve”) to provide for estimated future expenses as a result of construction and product defects, product recalls and litigation incidental to NVR’s homebuilding business. Liability estimates are determined based on management’s judgment, considering such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with the Company’s general counsel and outside counsel retained to handle specific product liability cases. The following table reflects the changes in the Company’s warranty reserve during the three and nine months ended September 30, 2013 and 2012:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Warranty reserve, beginning of period	$	77,341		$	58,790		$	62,742		$	64,008
Provision		15,798			11,870			49,701			27,587
Payments		(11,403	)		(9,559	)		(30,707	)		(30,494	)

Warranty reserve, end of period	$	81,736		$	61,101		$	81,736		$	61,101

The warranty reserve provision for the nine months ended September 30, 2013 includes a charge of approximately $15,600, recognized in the second quarter of 2013, to establish an accrual related to remediation of primarily water infiltration issues in a single completed community. The water infiltration issues were the result of a design issue with several products developed for and built exclusively in that one specific community.