A home warranty can be a good investment for some owners and a money trap for others. It depends on your budget, income, and level of risk tolerance. The age of your home and who you buy it from can also impact whether you’ll need a home warranty.
For instance, new construction already comes with a limited warranty from the builder. A resale may or may not include a home warranty from the seller. Usually, the older the home and its appliances, the more justification for including or wanting a home warranty as part of the sale. Below is some information regarding home warranties and what to expect.
What Home Warranties Cover
Home warranties typically pick up where your homeowner’s insurance policy ends. Warranties usually cover the cost of repairing your appliances, water lines, and irrigation systems. To learn more about your home warranty and what it covers, ask the provider.
But basically, you can expect the provider to send a service company or tech out if your fridge breaks down, your AC stops working properly, or your water heater starts leaking. Sellers sometimes offer a one to two-year home warranty plan in the sale of a pre-owned home to provide the buyer peace of mind. Since it’s a used home that’s unknown to the buyer, there’s some added protection for them in case something goes wrong.
Generally, you can expect three types of plans when contacting the provider-specific plans, optional coverage and robust plans. The first type covers the common things such as ventilation, heating, electrical issues, etc. Moreover, the second option covers electrical appliances such as refrigerators and microwaves – that are built-in. It covers a list of things, but they all need to be a part of the house. Lastly, robust plans are chosen by individuals who want to have a comprehensive home warranty plan which will cover free-standing electrical appliances, as well.
Although an inspection is usually a contingency of any home sale, inspectors can sometimes miss things. And they’re not necessarily responsible for pointing out or discovering an appliance that’s about to break down in two years. However, home warranties do not usually cover cosmetic issues such as a dent in a door or a less than attractive color of paint on the walls.
How Do Home Warranties Work?
The provider or company you have a home warranty with will schedule an on-site visit with a local vendor for any diagnostics and repairs. The homeowner usually doesn't get a say in which vendor the company sends out, and there can be delays. For example, someone might call in concern and wait two weeks before a repair tech shows up.
This is why some homeowners choose to forego home warranties and save up for major repairs. They figure the money they would send in each month to a home warranty company can be set aside with additional funds to cover maintenance and replacements. However, some people’s budgets are too tight to save the thousands of dollars it takes to replace a furnace or irrigation system.
Home warranty – benefits
Firstly, home warranties can be very beneficial for people who are not very handy. Some people cannot go around your house fixing little things such as switches that came out of their sockets. Or fixing the paint that got stripped down over time, filling in the nailed holes in the wall, replacing the bulb, replacing the shower pipe, etc. This could be due to multiple reasons – such as not having enough time or not being good with these things. In cases like these, home warranties can be worth it.
Secondly, for homeowners that are purchasing a new house and do not want to worry about the little things such as repair bills, etc., then a home warranty can help. It is common for people to not have any savings left after purchasing a house. So a home warranty can always act as a buffer as no emergency bills will be required, and everything will be fixed under warranty.
It can be frustrating to track down the contractors when something goes wrong, and this will prevent that. If you are moving into an expensive place or just have an expensive taste in electrical tools, then a warranty is going to be your best backup. A home warranty will never fail to provide peace of mind.
Lastly, this can also be beneficial for the seller as they will not need to deal with customer complaints all the time. It can be frustrating to get calls from the customer whenever some little thing goes wrong in the house – it can be time-consuming to deal with that. Hence, most home sellers use warranties for at least one year.
Home warranty – drawbacks
The most common issue with a home warranty is that there are many gray areas of what is considered right or wrong. Home warranties usually cover the items that are properly taken care of but many low-quality warranty companies can use this as an excuse. These types of companies can deny valid claims, and that can lead to many disagreements.
Warranties can be unfair when it comes to appliances that were left damaged or used by the previous homeowner. Any appliance that was not taken care of properly by the previous owner would not be covered in the warranty which can be unprofitable for the new owner. Moreover, the older the appliance – the less amount of money is spent on its repair according to many home warranty company rules.
Furthermore, according to many statistics, home warranties can be cheap in comparison to getting things fixed around the house. However, sometimes this can prove to be wrong as some homes are built nicely and things never break down or wear out. Moreover, in most cases, this is not the case as the probability of something breaking down is always higher than the things being stable.
How much money is required for home warranties?
The cost of the home warranty depends on the type of property you are buying. For instance, it will be different for a condo, a house in the town, or other various property types.
Another important factor to note is that the warranty cost is not dependent on how old the property is. The square footage only affects the cost when it increases by 5000 square feet.
Different home warranties companies offer different plans and each plan covers different sections of the house. For instance, some companies only cover the appliance systems under the warranty. Whereas some plans also cover pest control or roof repair.
So, to sum up, the home warranty doesn't mean necessarily that the homeowner won't be spending a penny more on the repairs. It mainly is about which warranty plan is availed and what is covered in that particular warranty. If the damages are outside the plan, then definitely additional money for repairs will be needed.
Is a Home Warranty Required?
So there's no doubt that homeowner's insurance is a must requirement. However, a home warranty is not always required. The only time a homeowner will want one is if they buy a newly constructed home from a builder. Since no one has lived in the home and it was probably inspected by the builder's contractors, a warranty protects the new owner in case there are defects.
Buying older homes can also be a concern for some buyers, but the seller’s not required to provide a home warranty. They do have to let a buyer hire a professional inspector to ensure all major appliances and components of the home are working or in good condition. If something major is wrong, the buyer can either walk away from the sale or require the seller to fix it.
Home warranties can help homeowners budget for major repairs and replacements insurance policies don’t cover. However, some find it easier to set money aside for these expenses. The decision is up to each individual.