Should You Get A Home Warranty?

What is a Home Warranty?

A home warranty covers things that your standard homeowner’s insurance policy will not cover.  Smart buyers and sellers can look to home warranties as a hedge against unexpected, and often expensive, repairs.  A seller can purchase a 6-month warranty for $350-$500.  When the house is sold (within that 6-month period) this same warranty automatically converts into 12 months of coverage for the buyer.  Sellers doing this make their home more appealing to buyers who see the value in a home warranty.  If the seller doesn’t offer a Home Warranty, the buyers can purchase own.  However, I suggest your agent negotiate into the contract that the seller pays for it.  

What is Covered?

Every home warranty company is a little different, but you can typically expect coverage for the following items, assuming they fail from normal wear and tear: heating & cooling system, electrical system, plumbing fixtures, water heater, dishwasher, stove, garbage disposal, garage door opener, built-in microwave, trash compactor, etc.  For additional fees, you can expand your warranty coverage include items such as pools, hot tubs, and 2nd heating & air conditioning units.

The Pros of Buying a Home Warranty

I’m a huge proponent of using home warranties.  For most people, they are an excellent way to save money.   Here are some reasons why so many homeowners are happy to have a warranty:

• Peace of mind:  The greatest thing about a home warranty is that it allows you to sleep well at night.   If your air-conditioner or dishwasher breaks down, it’s no bid deal…just call the home warranty company.  You don’t have to worry about the cost or hassle.  You only need to remember a single phone number or website address to request repairs.  There is no need to research and hire a good repair person.  Most claims can be submitted online or via phone 24 hours a day, 365 days a year.
• Your home warranty could be free to you: If you are a home buyer, always ask the seller to purchase your home warranty if they don’t already offer one.
• A home warranty is pretty cheap: Compared to some of the most common, worst-case-scenarios, a warranty is relatively inexpensive (especially if the seller pays for it).
• Avoid major expenses: Regardless of whether you pay for repairs by draining your emergency fund, use 0% promotional financing, or put the repair on your credit card, you’re paying out-of-pocket without a home warranty.
• Seller benefits: It’s a great buyer’s incentive. If you are selling your home, a home warranty is a selling feature.  Buyers love the peace of mind of not having to worry about major expenses after buying your home.

The Cons of Buying a Home Warranty

We’ve discussed the benefits of having a home warranty, but there are times when it might not meet your needs.  Here are a few things to keep in mind:

• You might not use it: If you are buying a new home with new appliances, and a builder’s warranty, then you won’t likely need the coverage.
• Service call fee:  You will pay between $75-$200 for each repair request.  Consider it your deductible.
• DIY may be cheaper: If you’re extremely handy, it may be cheaper to buy and replace parts yourself (unless you require a major repair or replacement).
• Some property types may be excluded from coverage: mixed-use commercial/residential & mobile homes may not be eligible.
• They’ll likely repair, not replace: The warranty company decides whether to repair or replace (they may repair your ugly old stove instead of replacing it…oh well).
• They’ll pick your repairman: The warranty company chooses the repair company (you can’t pick your repairman).
• There are limits: on the amount the warranty company will pay per appliance, per incident.