Do You Need A Home Warranty?

When buying a home, even if it isn’t brand new, there is a good chance that you will be offered, or even given a home warranty. The seller may offer to purchase one for you to provide peace of mind that if most any component of the home fails, it will be fixed. Most good real estate agents will make sure a buyer is covered with a home warranty for 1-year after closing. Why? It reduces liability to the home seller and listing agent should something go wrong after the sale.

A home warranty is a contract between a homeowner and a home warranty company. It provides a discounted repair and replacement service on a home’s major components, such as the furnace, plumbing and electrical system. Home warranties also have optional upgrades, which may also cover  washers and dryers, refrigerators and swimming pools. Most plans have a basic component that provides all homeowners who purchase a policy with certain coverages. Homeowners can also purchase one or more optional components that provide additional coverage at additional cost.why do you need a home warranty?

Home warranty companies have agreements with approved service providers. When something that is covered by a home warranty breaks down, the homeowner calls the home warranty company, and the home warranty company sends one of its service providers to examine the problem. If the provider determines that the needed repair or replacement is covered by the warranty, they complete the work.

I sold a gal a condo last year. It was built in 1974. It has been “flipped” by an investor, so many components of the unit were brand new-from the appliances, to the cabinets, carpet, paint, faucets, etc.  We had it thoroughly inspected by a qualified home inspector. While he found some issues, nothing was major. Unfortunately for my client, after moving in, she started noticing water on the floor that turned out to be a slab leak (this is a leaky water pipe in the concrete floor). Lucky for her, she didn’t install her new bamboo flooring yet.

So who pays in a situation like this? The HOA is off the hook and so is the seller. This issue most likely arose after she moved in and there isn’t much way the seller knew about anything like this beforehand. Luckily for my buyer, she had a 1-year home warranty that covered this problem!

What Does It Cost?
In addition to an annual premium of $300-500, most warranties charge a service call fee (also called a trade call fee) of around $60 every time the warranty holder requests that a service provider come out to the house to examine a problem. If the problem requires more than one type of contractor to visit (e.g., a plumber and an electrician), the homeowner may have to pay the service fee for each contractor.

Having a home warranty doesn’t mean the homeowner will never have to spend a penny on home repairs. Some problems won’t be covered by the warranty, whether because the homeowner didn’t purchase coverage for that item or because the warranty company doesn’t offer coverage for that item. Also, home warranties usually don’t cover components that haven’t been properly maintained. Furthermore, if the warranty company denies a claim (which they’ve been known to do!), the homeowner will still have to pay the service fee and will also be responsible for repair costs.

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4 Responses to “Do You Need A Home Warranty?”

  1. […] Home Warranty programs are normally paid by the seller. They cover most mechanical systems in a home. They cost from $300.00 to $800.00 depending on the size of the home, options such as a pool/spa, and the company. Most will have a service call fee of around $30.00 to $60.00 per visit.  Home warranties don’t cover structural issues and should never be used in lieu of getting a professional home inspection. […]

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