What’s the Deal With These Home Warranties Anyway?

Buyers and sellers seem to be confused about home warranties.

Questions I hear include: Are they worth it? Does that mean the house has passed some kind of test to qualify? Should a buyer prefer a house because the sellers are offering a warranty? Here are points to consider:

For Sellers

– Are there any old systems in your house that might need to be replaced in the next 1-2 years? (heating and air conditioners, water heater) – Is your house priced to attract 1st time homebuyers in your area? – How much does the warranty cost and what items are included? – If something breaks while the house is on the market, will you have the money to get it fixed?

For Buyers

– When you move into the home you purchase, will you have any money to pay a contractor if something breaks in the first six months? – Are any of the major (ie expensive) systems nearing the end of their life expectancy? (dishwasher, water heater, heating and air conditioning) – Do you know how to maintain a home? When to close crawlspace vents, how often to have your heating and air conditioning checked, how to winterize your outside water faucets in the winter? – Are you familiar with the city or county? Do you know who you would call if something breaks to find a reputable contractor?

-Home warranties can be great for buyers and sellers, especially for the first year you are in a home and getting used to it. Sellers can also pay for the option of having the warranty cover them in most cases while the home is on the market. A home warranty, however, does not replace a thorough home inspection for the buyer and it does not prevent a seller from having to do repairs before closing. A home warranty requires you to use their contractors so you cannot call someone from Angie’s List or who was recommended by a neighbor.

-Warranty companies are 3rd party companies – the house does not have to be tested or inspected to get a warranty. Home warranties cover most mechanical systems but they do not cover structural components. They have exclusions and limits so you should read the contract to know specifically what is covered and what is not. Warranties usually cost between $389-550 depending on the company and the exact level of coverage. If a seller offers a warranty it indicates to the buyer that the seller wants the buyer to feel confident their home will be a good investment. Buyers can also request a warranty from the seller during contract negotiations or purchase the warranty for themselves.

So, what is the final verdict – should you get a home warranty? Well, as my accountant likes to say, it depends. Ask your real estate professional and then decide for yourself.

California Home Warranty Policies

Home sellers or their real estate agents acquire home warranties to protect themselves against lawsuits if something in the house breaks within the first year. The Home Warranty Association of California (HWAC) is made up of the state’s warranty providers who offer some of the top home-warranty policies in California.

Fidelity National Home Warranty Company

Fidelity National Home Warranty Company is a member of the HWAC, receiving the association’s seal of approval, as well as a good rating from homewarrantyreviews.com. Fidelity National offers one-year Standard and Comprehensive Plus home protection plans to cover California policy holders’ major home appliances and systems. It pre-screens repair technicians and utilize an automated tracking system monitoring the status of your repairs. The company offers optional or additional coverage for certain household items and a 30-day guarantee on labor and parts. Policies are specifically catered to California home warranty specifications, which includes contractor response to a service call within 48 hours, a $55 service fee and guaranteed work for 30 days with a 90-day guarantee for parts. Buyer’s Coverage begins at escrow closing and New Construction coverage begins on the first anniversary of escrow closing.

Old Republic Home Protection Company, Inc.

Founded in 1974, Old Republic Home Protection Company Inc. is not only a HWAC member but also listed by Home Inspections USA. It received a good rating from homewarrantyreviews.com as well. The Comprehensive Plan allows customers to create custom plans by adding options to the Standard Plan. The Standard Plan covers failure due to lack of maintenance, rust or corrosion, improperly installed or mismatched HVAC systems, water heater sediment and unknown pre-existing condition coverage. Optional choices allow coverage of unique systems and the addition of enhanced services. The Sample Coverage plan is for single-family home dwellings under 5,000 square feet. Upgrade options include the Ultimate and Platinum Plus protection plans. All have extra options available for home buyers only.

2-10 HBW Warranty of California

An HWAC member and listed by Home Inspections USA, 2-10 HBW of California offers two types of warranties, the 2-10 Warranty/New Construction Home Warranty, and the Systems and Appliances Warranty/Home Service Contract. The 2-10 Warranty/New Construction Home Warranty must be applied for by the builder of a home who is required to meet underwriting guidelines and agree to follow the terms of his agreement with 2-10. On the date of closing, homeowners receive a Certificate of Warranty backed by 2-10 with the builder’s name on it. The Systems and Appliances Warranty/Home Service Contract covers major home systems and appliances. If one of the systems or appliances that a homeowner’s contract covers breaks down, 2-10 sends a contractor to do the repair. The homeowner pays a deductible and 2-10 covers the rest.

Why You Should Buy a Home Warranty