When Dayle Dixon and Mark Lee bought an attractive new house on the outskirts of Ivybridge in Devon in 2018, they believed it would be their forever home. But less than six years later it has been valued at just £1, and the couple are desperate to move out.

Dixon, 53, and Lee, 59, had not owned a property before, and bought their home using, in part, almost £55,000 borrowed through the government’s help-to-buy scheme.

The three-bedroom home looks pretty on the outside, with its cream-coloured exterior and long windows. There is a garage and space for two cars in the driveway.

But the property, which they bought from the Barratt Developments subsidiary David Wilson Homes for £274,995, was valued last year by independent chartered surveyors at  £1 after a catalogue of major defects emerged. The surveyors said that without the problems, it would have been worth £330,000.

After the then Conservative MP for South West Devon, Gary Streeter, visited the estate in 2018 he praised the development, writing on his website: “The quality of the new homes was evident, and the care taken to ensure the development fits into the surrounding locale was clear.”

Dixon and Lee say their experience of their home has been very different, however. “We have had literally hundreds of problems with the house,” Dixon says. “And repairs that have been carried out have not been done correctly.”

Dixon and Lee’s problems with their “dream” home began even before they moved in. They visited the property as soon as they got the keys, two days before their moving date, and noticed a hairline crack in one of the floors. Barratt agreed to put a screed layer on top before they moved in but Dixon says this made no difference. The next problem that came to light, soon after they moved in, was a broken soil pipe.

Over time more problems emerged. The couple have an extensive paper trail of their complaints, including reports assessing the problem and emails from them to people at Barratt outlining failures to resolve the issues.

Since they moved in Dixon has had time signed off work suffering from stress and anxiety, which she blames on the problems.

“I have developed PTSD, suffer from nightmares and sweats and can’t function properly. A lot of the time I feel physically sick,” she says. “We are living in a house that is a complete mess.”

The chartered surveyors who last year valued the couple’s house at £1 listed numerous defects in their valuation report, including inadequate damp proofing, water ingress, inadequate floor screed (used to create an even floor surface), inadequate window design, and damaged and corroding structural floor beams.

The report stated: “The ground floor will have to be stripped back to shell stage, sections of structural walls and floors will have to be removed, and it is likely that further defects which will require repair will be identified as works progress.”

It added: “Numerous significant defects have been identified. There has been limited positive engagement from the developer in resolving these issues … There is consequently an ongoing and costly dispute arising between the parties which only appears to be escalating.”

Reports commissioned by Barratt have taken a more upbeat view of the problems than those commissioned by the couple, although one structural assessment commissioned by the developer conceded that there was damage to one of the floor beams and that cracks needed to be monitored. Another Barratt-commissioned report recommended remedial action for cracks across the floor.

The couple are taking the firm to the small claims court over damage to items when repairers were in their home. Barratt declined to answer Guardian Money’s questions about the house, citing this legal action as the reason.

Dixon says that the couple have given up on their hope that the problems can be fixed and they can belatedly start to enjoy their home.

“We’ve had enough of having our lives wasted and being treated like idiots,” she says. “I want Barratt to buy our house back at the market value it would have if it was in a good state of repair – about £350,000.”

Others on the estate have also reported problems but no one else was willing to talk to the Guardian. One family said they were unable to speak to the media because they are involved in legal action against the company and do not want to jeopardise compensation settlements they are in the course of negotiating.

Elsewhere, Roberto and his husband bought what they thought was going to be a wonderful home in Wiltshire from Barratt last October.

They paid £400,000 for the three-bedroom detached house but say that a litany of problems soon emerged, including lack of insulation and a garage built 30cm lower than it was supposed to be, along with problems with a fence, brickwork, paving slabs and the door of their shower.

“It’s an absolute shambles,” Roberto says. “When we first purchased the house, we thought it was perfect, but we have had so many problems. The house is cold and we can feel the wind coming inside because of the lack of insulation. When they fix one thing they damage something else. I’m so depressed about the whole thing. Barratt has offered us financial compensation but some of the walls need to be stripped out completely and redone.”

The housebuilder has accepted that a range of identified defects need to be repaired, including the insulation problem, the replacement of external vents and checks to ensure ducting is adequately sealed. It has also agreed to remove and replace some of the skirting boards and some of the plasterboard and work to raise the height of the garage and the driveway. However, the couple are still living with problems.

“All of this is not fair,” Roberto says. “We want to make the house beautiful but there doesn’t seem to be any point. We paid to get a good home but it seems that we actually paid to get pain from Barratt.”

Barratt said it had carried out some work to the house but declined to give an on-the-record statement on the case.

Instead, a spokesperson said: “As a five-star housebuilder we are proud of the high quality of our homes and well over 90% of our customers would recommend us to their friends and family. We build thousands of homes every year and on occasion where things go wrong we work hard to put them right as quickly as possible.”

Dixon hopes that if Barratt buys back their home from them, they can buy another property.

Otherwise, she says, “We won’t be able to afford to rent … In the worst-case scenario, we’ll have to move in with my elderly parents.”

How warranties work

One of the big advantages of buying a newly built home is that it comes with a 10-year warranty – essentially an insurance policy.

If you discover problems with your new-build home, you have various rights and options when it comes to trying to get these sorted out.

The 10-year warranty

This is taken out by the builder or developer and is supposed to protect the homebuyer.

It is usually split into two periods: a builder warranty for the first two years, then insurance cover for the next eight years.

The consumer body Which? says that while the first bit covers structural problems and minor defects found within the first two years, which the builder is obliged to resolve, the second part of the warranty “only covers structural issues … It doesn’t cover cosmetic issues or minor defects”.

The HomeOwners Alliance agrees, saying the structural issues include foundations, the external render, roofs, ceilings, chimneys and load-bearing parts of the floors.

So buyers really only have two years to identify, report and resolve non-structural flaws that may take several months to come to light.

It is thought the vast majority of new homes are covered by the Buildmark policy from the National House Building Council, although there are several other warranty providers, including Buildsafe, Checkmate and LABC Warranty.

The consumer codes and complaints bodies

Hopefully the developer or builder will come round promptly to fix any problems. If you need to escalate a complaint, you will first need to go through the developer’s formal complaints process, Which? says.

If you are still getting the runaround, you have options. For example, the NHBC says it provides an independent resolution service should a builder not meet their obligations under Buildmark.

The next thing to do is to check if your builder or developer is signed up to a code of conduct. Almost all warranty providers require developers to sign up to a consumer code, which is there to protect consumers during the sales process and offers a dispute resolution service if things go wrong during the first two years, says the HomeOwners Alliance.

The two main ones are the New Homes Quality Code, run by the New Homes Quality Board (NHQB), and the Consumer Code for Home Builders (there is also the Consumer Code for New Homes). Your developer should let you know which one applies to you.

If a builder allegedly doesn’t meet the requirements of the NHQB code, consumers can go to the New Homes Ombudsman Service, which will investigate and provide compensation if necessary.

Meanwhile, if you think your developer has breached the Consumer Code for Home Builders, you can access its independent dispute resolution scheme, which may order the company to pay compensation or carry out remedial work.

• This article was amended on 15 July 2024 to remove some personal information.