Obviously there are a lot of uncertainties when buying real estate, especially residential properties given the size of the investment. If you are buying a home do you really need a home warranty? It really depends on the property.
As a full service real estate company we are NOT in the home warranty business, although we have a duty to our Buyer clients to inform them of their availability and risk management benefits. First and foremost, home warranty companies are in the business to make money. Home warranty coverage generally includes limited coverage of the structure, appliances and mechanical components. Some home warranty companies are specialized and may only provide coverage in a specific area of the structure such as a basement covering cracks and rod holes leaks and nothing else. Home warranty applications and coverage are drafted to favor the warranty service provider as a way of reducing their liability during the warranty period and to reduce the incidence of fraudulent claims. Home warranty service providers generally don’t make a profit on a home warranty product the first year. Instead, they reinforce the importance of extending (renewing) the home warranty each year given the rising cost to the consumer to repair and/or replace covered items. As an example, replacing a sump pump for example could cost $250 by a licensed plumber, almost the cost of a one year base rate home warranty. Generally the Buyer pays a service call fee for each occurrence (varies by vendor) and are required to contact the home warranty provider first to ensure coverage. Normally home warranty companies have an approved network of contractors who are dispatched for approved warranty issues. There are some companies, however, that will allow contractors outside their network as long as the Buyer follows the warranty protocol for submitting claims. Home warranty rates vary by type of property to be covered, ranging from mobile homes to multi-unit residential dwellings, size, amount of toilets (really), etc. Most companies sell optional coverage for properties which have hot tubs, pools, water softeners, etc. Policy cancellation terms vary by vendor as well and generally favor the warranty company. For our Buyers, we always encourage the use of a home warranty product to reduce their liability after the sale.
We encourage our Buyers to frequent our website and blog for available warranty products and related information prior to any offer to purchase as most warranty vendors have time constraints in which new home warranty policies can be originated. If a Buyer were to conduct a Google search for “home warranty companies” they might be surprised to find search results in excess of 400,000. Obviously that’s too many to review so in the interest of time, we have prepared a list of home warranty companies below which service our area. So, using the links shown in the column to the right, we encourage our Buyers to review each home warranty service provider’s contract, coverage, optional coverage and claims procedure prior to listing so that they can make an informed decision. As a Buyer client, we may be able to save as much as 20% off the published warranty rates for the first year should they decide to use a home warranty product for their property. Once the warranty application has been submitted with payment (generally at closing) and acknowledged by the warranty service provider in writing (generally 3-7 business days), the Buyer’s coverage begins. If a Buyer chooses to forego home warranty coverage we ask that they sign a waiver at the time of their offer to purchase. We do this for two reasons, first and foremost to reinforce the availability and benefits of having a home warranty; (2) to reduce our company’s future liability should a claim of defect be brought by the Buyer after closing. A HOME WARRANTY IS NOT A SUBSTITUTE FOR A HOME INSPECTION, BUILDERS WARRANTY, SELLERS DISCLOSURE OR ANY OTHER TYPE OF DUE DILIGENCE AVAILABLE TO BUYERS PRIOR TO ANY OFFER TO PURCHASE. For our Buyer clients we always encourage language in their offers to purchase which request a Seller funded home warranty. For further discussion regarding home warranties, please visit our blog for recent postings.