What is a Home Warranty and Should I Purchase One?

Depending on which part of the country you’re shopping for homes in, you may run across listings that come packaged with a “free home warranty.” When I was shopping for my first condo, and long before I became a Realtor®, my inclination was to avoid these properties for fear that there were latent defects that the sellers didn’t want to disclose. (Looking back, it was silly, but first-time buyers have such wild imaginations!)

I now know that home warranties are used as marketing tools to give new owners peace of mind that they won’t have major repair bills within the first year of home ownership…when money is usually tight.

House falling apart? Maybe you should have purchased a home warranty!

A home warranty is very much like an extended service contract on a vehicle in that they cover the repair, or replacement of most appliances and systems (plumbing, electrical, heating/cooling etc). In addition to these standard items, expanded coverage can usually be added at a premium. The annual cost can vary wildly dependent on coverages and exclusions, but typically ranges from a few hundred dollars for small condominiums to $800 for larger homes.

On top of this yearly fee, you will usually have an out-of-pocket charge of $50-$100 per service call. If one of your covered items breaks down, you call your warranty provider and they dispatch the appropriate repair person to your home.

Some important things to keep in mind:

1. This does not replace and should not be confused with homeowner’s insurance (medical, burglary, fire, hazard).
2. Check the covered items and exclusions in the contract carefully before paying for the plan. In general, the more expensive the repair estimate, the more likely the provider is to claim that the failure is not covered by your policy.
3. You won’t be able to control who does the repairs, and scheduling the work can be trickier since you aren’t the direct client.

Bottom line: Home warranties can be convenient versus finding and screening your own vendors for every trade, and offer predictability with budget and expense tracking. On the other hand, it could end up being a total waste of money. Especially, if you are the type that diligently maintains your home, or should the failures be outside of your coverage. If you’re anything like me, it may be a wise investment since my things only break when I don’t have insurance, or the “extended protection plan.” Murphy’s law, I suppose.

Need a recommendation on home warranty providers? Contact me anytime!