Are Home Warranty's Worth It?
So you've been in your home for a month now, and you're loading the dishwasher to find out it won't turn on.... What do you do? Let's talk home warranties!
For just a moment, imagine after only one month of moving into your new home, you’re in the kitchen loading your dishwasher, and you turn it on and it doesn’t work, or you notice the temperature in your home is 60 degrees because your furnace decided it was a good time to die.
Situations like this are extremely stressful, and can most definitely be expensive, especially after pouring your life savings into your first home. It doesn’t exactly make being a homeowner fun in any way at all.
Luckily for you, there’s a way to alleviate some of the financial burdens you come across being a new homeowner. Let me tell you how!
So how can you save yourself from facing hefty expenses and the stress of major appliances or systems in your home falling apart?
You can purchase a home warranty! There’s a big misconception about home warranties that they are insurance policies, but in reality, they are a type of service contract that covers the cost of repairs and/or replacement of the covered items depending on what coverage you get. Warranties were created to cover items that fail due to normal wear and tear. They may be in good working condition upon occupancy, but what about 2, 6, 8 months down the road?
What do home warranties cover anyway? Most home warranties cover the following: appliances such as your dishwasher, oven, garbage disposal, microwave, washer and dryer, garage door opener, refrigerator most the time but may not include the ice maker if you have one, furnace, air conditioner, electrical and interior plumbing (ductwork coverage may be extra).
The most frequently asked question pertaining to home warranties is, are home warranties worth it?
For a range of $300 to $650 a year depending on what coverage you get, and having to pay an annual premium and fees for service calls around $50 to $150 depending on your contract, it truly is a small price to pay especially when your $4,000 furnace decides it doesn’t want to work anymore.
Without having a home warranty, or having any additional funds set aside for repairs and replacement, you could find yourself spending thousands of dollars to replace something you don’t have the money for.
First time home buyer or veteran homeowner, it doesn’t matter, a home warranty is a great safety net during homeownership. Especially if the home was previously owned, and the home inspection uncovers numerous issues with the home’s systems and appliances, that would be a great time to invest in a home warranty. It’s crucial you take the time to read and understand the home warranty’s terms and conditions as well as how long the coverage is good for.
If you’re curious about home warranties and what they cover, be sure to reach out to a real estate professional like myself to receive a detailed brochure as to what is covered and what is not depending on the coverage you want to purchase.
Another frequently asked question is, When don’t I need a home warranty? If you’re considering a new construction home, a builder may offer you a personalized warranty for the home’s materials and systems for up to 10 years. This warranty doesn’t typically cover your home’s appliances, so be sure to look at the manufacturer's warranty for all your appliances.
Let’s jump into some pros and cons of home warranties. I’ll start with the cons
Depending on the home warranty company and coverage you purchase, they often have dollar limits per repair per year. So be sure to read the fine print. If something is too good to be true, it probably is.
Even if an item dies on you it’s possible that the claim you made is denied, as the service call representative can say you haven’t maintained the unit correctly and that’s on you. So if there’s something you take away from this, it’s to make sure you are keeping up on your home's maintenance.
Another con is, if your dishwasher, refrigerator, washer or dryer are in need of being replaced, you may not be able to choose your desired make or model of the unit.
As a home warranty company, they determine what needs to be fixed and what needs to be replaced, and with that being said, you may not always agree with the decision they make.
Lastly, As I mentioned before, there’s service call fees that range from $50 to $150. So every time an incident occurs you have to pay that fee, and if the situation requires an additional technician, you may have to pay that fee to each one of them.
But what are the pros of purchasing a home warranty?
Not only does a home warranty give you peace of mind, it also offers convenience. You could spend days trying to call and figure out what company or contractor is qualified enough to do a job you approve of. 10 quotes later, you haven’t made any headway. With a home warranty, you can skip that step and simply contact the service company who will do the research for you and find the perfect person to take care of the problem.
Another pro for having a home warranty is creating a better appeal to your home. When you go to sell your home and you decide to offer a home warranty, Buyers are more likely to not only view your home, but purchase it. By offering a home warranty with the sale of your home, it eliminates potential buyers from questioning all the condition of your home’s systems and appliances. Typically, sellers will offer a one year warranty between $300 and $650. You may not look at this as a huge benefit, but you’ll understand what I mean when you go through the process, as buyers are always looking to negotiate costs and push sellers to give back a little bit so they don’t have to make repairs they didn’t budget for when they began their home search.
It’s important to do your research and understand the coverage and terms before investing into a home warranty.
So should you get a home warranty or not?
That’s a great question! You could go online under any forum and most people would say it isn’t worth it, but I truly believe it depends on the home. If a home is newer, and the home inspector doesn’t reveal any issues with the home’s systems or appliances, and your cousin who just happens to be in the heating and cooling industry says he’s seen worse, maybe you aren’t in need of one.
If you purchase a home that’s 20+ years old and the condition of the home’s systems and appliances is questionable and you aren’t a diy’er to get the job done, you may want to purchase a one year home warranty with coverage catered to what a home inspector reveals, just so it’s one less thing you have to worry about.
Let’s just say you have decided to purchase a home warranty, how do you begin the process?
Firstly, determine your coverage needs, take a walkthrough of the home and/or take pictures of the home’s system and appliances at the showing to analyze if those appliances are nearing their expiration date and may require repair in the near future. Are there still active warranties on the appliances that will cover the repairs? If so, you won’t necessarily need home warranty coverage. How old are the systems approximately?
Secondly, do your research and find a reputable home warranty company that fits your needs. Don’t just do one google search and click on the top company, coverage is crucial, so finding the perfect company for you will take time. If you’re going through the buying process, Real estate professionals provide a form that accepts or denies home warranty coverage, and you can view their offerings as well.
Thirdly, be sure to read the fine print. Take your time and truly understand the verbiage that’s being expressed in the terms and conditions. Don’t just assume everything is covered because it’s vaguely mentioned on the first page, read from cover to cover on the brochure so you don’t find yourself having a yelling match on the phone with a service representative.
For those of you that have purchased a home warranty, comment what your experiences have been so far, and for those of you that didn’t purchase a home warranty, do you wish you did?
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in White Lake, Michigan.