Do You Need A Home Warranty?

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Do You Need A Home Warranty?
Slope Style Realty
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When you purchase a home, even a home that isnt
new, there is a very good chance that you will be
offered a home warranty. The seller may offer to
purchase one on your behalf to provide peace of
mind that any component of the home that fails
can be fixed affordably. If not, you will likely
receive numerous mail solicitations to purchase a
home warranty once the sale. A home warranty
may sound like a great form of financial
protection against expensive, unforeseen home
repairs. But is it really the safety net
homeowners expect.
What Is a Home Warranty?
A home warranty is not the same thing as
homeowners insurance, nor is it a replacement for
homeowners insurance. Homeowners insurance covers
major perils such as fires, hail, property crimes
and certain types of water damage that could
affect the entire structure and/or the
homeowners personal possessions. A home warranty
does not cover these perils. Rather, it covers
specific components of the home.
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A home warranty is a contract between a homeowner
and a home warranty company that provides for
discounted repair and replacement service on a
homes major components, such as the furnace, air
conditioning, plumbing and electrical system. A
home warranty may also cover major appliances
such as washers and dryers, refrigerators and
swimming pools. Most plans have a basic component
that provides all homeowners who purchase a
policy with certain coverage's. Homeowners can
also purchase one or more optional components
that provide additional coverage at additional
cost. 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, he
completes the work. The homeowner only pays a
small service fee, plus the money she has already
spent to purchase the warranty.
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What Does It Cost?
A home warranty costs a few hundred dollars a
year, paid up front (or in installments, if the
warranty company offers a payment plan). The
plans cost varies depending on the property type
e.g., single-family detached, condo, townhome,
duplex, and whether the homeowner purchases a
basic or extended plan. The cost usually does not
vary with the propertys age, unless the home is
brand new, which increases the cost of coverage.
The homes square footage also does not affect
the price in most cases, unless the property is
more than 5,000 square feet. Separate structures,
such as guest houses, usually are not covered by
the basic policy, but can be covered for an
additional fee. However, garages should be
covered by the basic policy. In addition to an
annual premium, home warranties charge a service
call fee (also called a trade call fee) of around
75-125 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.
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Having a home warranty doesnt mean the homeowner
will never have to spend a penny on home repairs.
Some problems wont be covered by the warranty,
whether because the homeowner didnt purchase
coverage for that item or because the warranty
company doesnt offer coverage for that item.
Also, home warranties usually dont cover
components that havent been properly maintained.
Furthermore, if the warranty company denies a
claim, the homeowner will still have to pay the
service fee and will also be responsible for
repair costs.
The Benefits of a Home Warranty
Like all warranties, a home warranty is supposed
to protect against expensive, unforeseen repair
bills and provide peace of mind. For a homeowner
who doesnt have an emergency fund or who wants
to protect their emergency fund, a home warranty
can act as a buffer. Home warranties also make
sense for people who arent handy or who dont
want to worry about tracking down a contractor
when they have a problem. Warranties can also
make sense for people with expensive taste in
appliances.
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The subject of home warranties often comes up
during the sale and purchase of a home. A home
warranty can provide reassurance to a homebuyer
who has limited information about how well the
homes components have been maintained (or how
well the home has been built, in the case of new
construction). A warranty can also be helpful for
someone who has just depleted their savings to
buy a home and wants to avoid any additional
major expenses. For home sellers, offering the
buyer a paid-up, one-year home warranty with the
home purchase may provide a measure of protection
against buyer complaints about any home defects
that arise after the sale closes. However,
providing a home warranty does not exempt the
seller from her legal requirement to disclose any
known problems with the home.
Home Warranties Have Drawbacks
If home warranties were perfect, everyone would
have one. But they dont. Why is that? One major
problem with a home warranty is that it will not
cover items that have not been properly
maintained. What is considered proper maintenance
can be a significant gray area and is the source
of many disagreements between home warranty
companies and warranty holders. In a worst-case
scenario, unscrupulous warranty companies may use
the improper maintenance clause as an excuse to
deny valid claims. In another scenario, the
homeowner and the contractor who makes the house
call may simply disagree over what constitutes
proper maintenance.
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Another common problem is that when a homeowner
purchases a used home, it might come with a
10-year-old furnace that the previous owner did
not maintain. At that point, no matter how well
the new homeowner tries to care for the furnace
going forward, he cant correct the previous lack
of maintenance. In addition, warranties have
numerous exclusions, as well as dollar limits per
repair and per year. Home warranties arent
expensive compared to the cost of repairing or
replacing most of a homes important components,
and this fact is one of a warrantys major
selling points. However, there may be many years
when nothing at all breaks down or wears out in
the home. In these years, the homeowner gets
nothing (except, perhaps, peace of mind) in
exchange for his premium. That money could be put
into an emergency fund for making the same
repairs and replacements that the home warranty
would cover. Also, if the homeowner tries to use
the warranty and the claim is denied, he will
probably feel like the money spent on the premium
and the service call fee was wasted. Home
warranties do eliminate the need to find a
contractor when something breaks. However, they
also eliminate the freedom to choose your
own independent contractor if you want the
warranty to pay for the repair or replacement. If
you dont like the contractor or the work they
do, you may be stuck with them. Furthermore,
repairs may be more complicated with a third
party (the home warranty company) involved in the
process than a direct negotiation between a
homeowner and a contractor would be. Also, the
homeowner may have little or no say in the model
or brand of a replacement component though the
warranty contract should provide for a similar-
or equivalent-quality replacement.
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The Bottom Line
A home warranty is not a perfect solution to the
risks homeowners face. Before purchasing one,
homeowners should read the fine print in the home
warranty contract and carefully consider whether
the warranty is likely to pay off. Home sellers
who want to offer a warranty to buyers and
homeowners/buyers who would feel more comfortable
having a home warranty should also do careful
research to find a reputable home warranty
company that will actually pay for legitimate
repairs when they are needed.
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FOR MORE DETAILS
Visit our Website
http//www.slopestylerealty.com
Slope Style Realty Christy Wilkey Caroline
Krumel