What is a home warranty?
A home warranty, more correctly called a residential service contract, is a product that many home buyers are offered at some point in their purchase of a home. The purpose is to provide a one call does it all solution for all of your home repairs. While a home warranty does actually provide a warranty on the equipment and systems in your home, when something breaks, you call the home warranty provider’s toll free number and they arrange for the appropriate repairmen to come to your home for a service fee (typically under $100). You pay nothing more than the service fee, as long as the repair is covered under your particular home warranty plan. It saves you money and the hassle of knowing which company to call. The home warranty companies keep a list of approved vendors so you don’t have to personally vet the repairmen coming into your home.
How much does a home warranty cost?
This really depends on the provider. There are many home warranty companies out there. Talk to your real estate agent and find out what their clients have been using and saying about the different companies. Ask your agent for a list of companies and also ask if they receive any compensation from that company if you use them – for whatever reason this is still legal in real estate (we even have a form in Texas that is used to disclose such a relationship).
What does the home warranty cover?
It really depends on the coverage you select, but most home warranties will cover the basic systems of your home – plumbing, electrical, HVAC, kitchen appliances, etc. You should always check with the home warranty company and know before you buy. Many companies will offer extended coverage for items like refrigerators, pool equipment, termite control…the list goes on and on.
Who pays for the home warranty?
Much like everything in real estate, this is negotiable. Typically, buyers ask sellers to pay for it and it is used as a negotiating tool during the initial offer. If you’re a buyer, be sure your real estate agent uses a value that is high enough to cover the cost of the home warranty you would like, otherwise, even if the seller agrees to pay, you may still wind up paying for some of it out of pocket (ie, the cost of your desired home warranty is $575, but your agent only asks for $400 – you would still owe $175 on the policy).
How long is the coverage good for?
Your home warranty coverage is good for a year from the date of purchase (the closing date). Your home warranty provider will contact you about renewing sometime before then. Costs typically increase after the first year, so be prepared.
Hopefully these items will help you understand home warranties a bit better. It’s always a good idea to read through your coverage carefully and know what is and isn’t covered. Overall, a home warranty can provide some peace of mind in your home, especially during the first year after spending so much money to buy your home. They offer an easy, convenient way to get repairs done on your home and keep things in good working order. You can think of them as a kind of insurance policy on the major systems of your home…one you’ll hopefully never have to use, but will appreciate when it is there to cover you.
image courtesy of @boetter