Home Warranties – Home Buyer Beware

A concept that has become vogue in residential real estate in the last several years is home warranties. The seller of a property you are considering may offer a home warranty on their house to sweeten the deal. But should you accept a home warranty in lieu of repairs of inspection items?

The basic way a home warranty works is that you pay a premium of $250-600 (or in this case, the seller pays it). Then, if something breaks in your new house, you call the warranty company and they contact a local service provider. For a service fee (you pay this) that ranges from $25-75, the service provider comes out and fixes what is broken. IF it isn’t an exception. This can be a big “if.” The home warranty I have on my house didn’t cover the refrigerator, certain parts of the air conditioning and heating system (usually the expensive parts), and even hauling off the broken parts once they repaired the item. Guess what appliance broke first. The refrigerator. Haha! It was an extra $150 to upgrade to the premium service that covered the refrigerator.

Now, I should mention that the home warranty I have has covered its cost. On two different occasions, I had appliances break, and the company came out and made repairs that would have cost over $300 each. If you are considering a warranty, make sure you read the entire agreement and determine what the exclusions are before you buy it. Some will have exclusions for preexisting conditions or for deferred maintenance. Refer to the micro-print for such exclusions. Also, there are several companies that have been around for many years. Some have just jumped on the bandwagon when it became an exceedingly profitable business to be in. These companies may have no track record. There are several websites that offer home warranty reviews. I suggest researching customer reviews before selecting one.

The concerning trend with home warranties is that sellers are offering them to sweeten the deal to buyers. Real estate agents seem to be driving this emerging trend. What you need to be aware of as the buyer, however, is that warranty companies pay real estate agents a commission for each policy that they sell. So of course they will recommend them. Buyers agents may even suggest asking for them in the initial offer to purchase. Louisiana now has a home warranty clause in the standard residential agreement to purchase.

The problem from a negotiating standpoint is this: Once you are getting a home warranty as part of the contract, it can make the seller less willing to repair items the inspection uncovers. Their thinking is that they are offering you this home warranty so why do they need to fix the leak in the air conditioning unit. This becomes costly for you because the seller might have otherwise felt compelled to fix these items or reduce the purchase price of the home to compensate you for making the repairs yourself. Then, when it comes time to fix these items, your warranty may have expired or may exclude the item.

If you decide to ask for or accept a home warranty, make sure you are clear what exclusions the provider of the warranty policy offers. I recommend not asking for a home warranty and buying it yourself after the sale closes. Most companies are still ecstatic to provide it. I certainly caution you against accepting a home warranty in lieu of the seller making repairs to satisfy the inspection contingency. A savvy negotiator can use the inspection report to save thousands of dollars when buying a home and a home warranty can sabotage this valuable negotiating tool.

Is There an Advantage to Getting a Home Warranty When Buying a House?

You may have been looking for a house lately and you saw a sign on the house that says “home warranty”. Well many people do not know what a home warranty is and I have even heard some people say that they don’t want one because they believed it to be some sort of scam. Well, I am here today to spell out exactly what a home warranty is and why you should not only get one when buying a house but you may want to keep one on the house your in now. Even if you don’t plan on moving.

A home warranty is like an insurance policy on your house’s major systems. In other words it protects you from the unexpected expenses of one of your major systems in your house going out. Let me give you an example. I had a woman that purchased a house from us. Whenever we sell a house to someone we offer them a one year warranty as a closing gift. Well this woman purchased a house from us and the house had an older furnace in it but there was nothing wrong with the furnace when she bought the house.

Well during that winter, the furnace went out and she was left without heat during the coldest time of year. She promptly called us to complain but we reminded her about her warranty. She called the warranty company and they sent a technician out the same day to service the furnace. The furnace was not repairable. So without the warranty she would have had to purchase a new $4500 furnace. That’s a lot of money to have to come up with unexpectedly. But because she had the warranty, the home warranty company covered the cost of the new furnace and the installation.

She got her new furnace installed the same day. Her only cost was a $50 deductible which is standard for home warranty companies. Now compare a $50 payment to a possible $4500 bill and you can see why a home warranty makes sense. Home warranties normally cover your furnace, central air, washer & dryer, even your roof and sump pumps.

They can also cover things such as busted pipes or electrical systems. Home warranties usually cost about $250-$500 a year and if anyone of these systems goes out then you are usually going to pay more than that. Also, as I mentioned earlier, you don’t have to just get a home warranty when you buy a house. You may want to look at getting one on your own home. First, because it will almost always cost you less to have a home warranty on your home if something breaks, and second, it is a good way of controlling unexpected expenses.

So take a closer look at home warranties. They are a good investment for your home. Here is a web link to some companies.

Americanhomeshield.com

Nationalhomeprotection.com

Ehomewarranties.com

P.S. I do not endorse any particular company.

Home Security FAQ

Frequently Asked Questions about your Home Security System

Do Home Security Systems prevent burglaries?

A home security system will not prevent a break in directly. The system is designed to detect if someone is trying to break in to your home or if they have already entered your residence. Depending on the options that you have chosen for your alarm system you can detect a thief before they enter the home. The system will trigger a loud alarm that can drive the burglar away. If your alarm system is connected to a central station with 24 hour monitoring then the authorities can be dispatched to your home automatically. Te presence of an alarm system does statistically reduce break-ins over homes without one.

How do I choose the best home security system?

A good quality alarm system is more than a brand name. There are basically two types of systems available. These are wired and wireless. The wired system requires running wire throughout your home from the control panel to every home security device. The wireless security system operates with the use of transmitters and batteries that communicate to the control panel. The wireless system is a favorite with DIY Installers and professional installers alike. There are cases when the wired system is the clear choice but that is usually in more complex installations.

What features should I select when purchasing a home alarm system?

Security Systems have evolved drastically over recent years and are much more than a basic intruder alert system. They can be controlled remotely from a cell phone or laptop computer. Your lights can be turned off and on by a programmed schedule or by remote access. You can even open your doors with the tap of a button from anywhere in the world. The more important question is what types of protection that you want. Today’s security systems can also double as an emergency alert system for the elderly.

The basics in any home security system should be:

  • Perimeter protection of all doors and windows
  • At least one motion sensor inside your home
  • Fire protection with a minimum of one smoke detector
  • A Carbon Monoxide Sensor

Can I have an Alarm System in an Apartment?

People that rent apartments do have a tendency to be more transient than people that purchase their homes. This means that many times you do not get to know your neighbors or if you do they may not be living next to you for long. Considering this as the norm then a security system can be even more important in an apartment because you do not have the built in protection of neighbors looking out for each other. A wireless alarm system is the best choice since many control panels can be installed without penetrating any of your walls. They are easily removed and taken to the next location that you move to.

Do I have to pay for Home Security?

There is always a cost to just about everything. Do not be fooled by the ads that say you can get a free security system. The free security systems use an over inflated value for what you are getting and the cost is built into the monthly fee that you will be paying for central station monitoring. You have several options in the amount of money that you pay but there will always be a cost.

Option One-Do It Yourself Install with No Monitoring

The cost involved will be for the cost of the control panel and the individual devices that you select for your home. This is a onetime cost unless you choose to expand and add more devices.

Option Two-Do It Yourself Install with Monitoring

The cost of the equipment will be the same. If you do your own installation and want to get monitoring by a professional company then they will charge you a minimum of a service call and a monthly fee for monitoring.

Option Three-Professional Install with No Monitoring

This option will be the cost of equipment and labor. Alarm companies are counting on the recurring revenue that is generated every month so if you have elected to not have your system monitored then there will be no discounts on the installation price. Remember that anywhere you go will have a built in markup on the equipment.

Option Four-Professional Install with Monitoring

This is actually the most inexpensive way to get a security system for the short term. I say short term because the alarm installation company will give you a free security system. However the system will be limited in devices. The typical free offer is 3 door sensors and 1 motion detector. This is a very limited system and only offers partial protection. The alarm company will install additional devices at an additional cost. The problem with this type of system is that besides the minimal protection you are actually paying for the system every time you pay for your monthly monitoring.

Am I required to have a phone line or cellular phone for my security system?

In the old days if you wanted your home security system to be monitored you were required to have a phone line. This was never an issue because most everyone had a phone installed in their home. With the addition of cell phones to everyone’s life many people no longer have a home phone line. If you want to have your home monitored then you must select to get a phone line or you can use cellular technology. This does not mean that you need a cell phone. The control panel has a GSM device that uses cell phone towers to communicate to the central station instead of the traditional phone line. The cost of this service is built into your monthly monitoring fee. You do not have access to use the cellular device. It is dedicated to the alarm system. If you do not currently have a phone line you must consider the additional cost of adding one and paying for the monthly service. Your monitoring service will range from $24.99 to $65.00 per month depending on the alarm company and the features that you are using. If you choose to use a phone line you are adding an additional $20.00 per month.

Is Cellular better than Landline monitoring?

In my opinion cell phone monitoring is the best type of monitoring. A landline can easily be disabled by a savvy burglar. The cell phone chip is located inside the control panel so in order for it to be disabled the intruder would need to be inside the home. By then the alarm would have already been triggered. The cell phone technology also allows complete remote control of your system while land line access is limited.

Will my call waiting affect my home security system?

When a security system is properly installed the system will take over your phone line. If the system goes into alarm and needs to contact the central station the phone line is automatically disconnected from the house lines and at that point is dedicated to the sole use of the alarm system. Once the transmission is complete the line is returned for normal operation.

When I have a power loss will my alarm system still work?

All home security systems are designed with a battery backup. When your normal house power is lost the control panel will switch over to battery power. If there are no alarms generated while on battery power your system can last at least 24 hours without your power being restored.

Will my pets trigger my alarm system?

Home security systems are still very effective when you have animals in the home. There are specially designed motion sensors that can accommodate up to 55 lbs without false alarms. The installer should be aware that you do have animals before the placement of the detectors. There are some extra precautions to take when pets are an issue. Such as never have the motion sensor too close to the back of a couch or other piece of furniture. A potential does exist if a cat or dog were to jump onto the back of the couch.

Can having a security system lower my home owners insurance?

The short answer is yes. Most, if not all insurance companies will give you a discount if you have a monitored security system installed. If you have a salesperson in your home they will tell you that you will receive up to 20%. That is true in isolated cases but you should ALWAYS check with your agent to see what the actual amount is.

How does my alarm system work?

Your alarm system has 4 modes of operation. They are armed in Away, Armed in Stay, and disarmed and there is a 24 hour mode. The armed in away mode means that you have armed your system and you have left your home. The armed in stay mode your system is armed and you have stayed home. In this mode the interior devices are disabled so you do not set the system off. In the disarmed mode the only devices that will work are the ones that are designated as 24 hour devices. This normally applies to smoke detectors. Glass break sensors and medical pendants. Regardless of the mode of operation if an alarm is triggered the system will sound the audible device and also send a signal to the central station is you are monitored. The central station personnel will call you to confirm the alarm. If you are not at home they will dispatch the appropriate authorities.

Why do my motions get triggered when there is no burglar?

Motion sensors can be touchy and are responsible for more false alarms than other devices. They are a necessary part of your home security system but they must be installed properly and they do require more maintenance than door and window contacts. You must take care to not install the detector too close to moveable objects such as balloons, blinds, curtains. Take care to not mount the motion detector too close to a furnace or vent. You should also clean the exterior of the lens to keep cob webs and dust from forming. If you are experiencing false alarms the device may need to be replaced, adjusted or relocated.

How long does my security system take to contact the monitoring company?

When your alarm system is triggered the system there is a built in short delay before the signal is sent to the central station. This is only a few seconds at default. Once the signal is sent there will be a phone call to the listed phone number to try and confirm the alarm. This helps to keep false alarms and unneeded police dispatches to your home.

How do personal safety devices such as panic and medical pendants work?

If your system is wireless then you can have a key fob programmed into the system. The key fob gives you the ability to arm, disarm and send a panic alarm into the control panel. There are also medical pendants available that will trigger a medical emergency alarm to the control panel. Each alarm that is sent to the central station is a unique type of alarm. They know that there is a medical emergency and will dispatch the correct authorities. These devices usually come with a variety of ways to attach the pendant such as a bracelet or wristband. They are also water resistant so they can be worn into the shower.

What happens when I use the emergency buttons on the control panel?

The keypad for a control panel usually has three additional types of buttons. They are for fire alarm, medical emergency and panic. These require you to hold the button down for 3 seconds. The monitoring company will receive the alarm and send the appropriate authorities. These emergency buttons are available for a quick dispatch of emergency personnel.

How many smoke detectors are required?

The recommended distance is 30 feet apart. There should be a smoke detector on every level of the home. It is also highly recommended to have smoke detectors in the bedrooms.

How do I stop a false alarm?

Your security system is designed to have a short delay before it sends a signal. The central monitoring station will also try to reach personnel on the contact list to confirm the alarm if possible.