Should I buy a home warranty when I'm buying?
Some Nomads see great value in buying a home warranty to reduce the risk of a repair on a home they're buying. The home warranty companies, like an insurance company, are in business to make money so they are trying to collect more in premiums then they need to pay out in claims.
So, over a large group of people they'll almost always collect more by having people buy home warranties then they'll pay out in repairs. However, any one individual could pay the relatively small home warranty premium cost when they buy a home and have a claim that exceeds the cost of the home warranty. When you find yourself with a repair covered by a home warranty that would have exceeded your premium you'll probably be happy you purchased the home warranty.
Personally, in general I am neutral to home warranties. I can see situations where many of the home components covered by home warranties are nearing their end of life and a home warranty seems like a really reasonable investment where you're reasonably likely to be able to make a claim. For clients that have resources and are willing to take on those risks themselves, paying an up-front premium of a home warranty may not be necessary.
How much does a home warranty cost?
The price of a home warranty varies depending on the company providing it, the market that you're in, what is covered and the length of the plan.
In Northern Colorado a basic home warranty that covers your home for about a year will cost about $350. A home warranty plan that covers a little more might cost $450 to $500.
Can I buy a home warranty after I have a problem?
Not usually… most home warranty plans exclude pre-existing conditions so you can't wait for a problem to happen and then try to buy a home warranty to have that problem fixed.
Should I buy a second year for my home warranty?
Sometimes I think it would be worthwhile to pay for a second year on your home warranty. If you thought the age and/or condition of some of the systems covered by a home warranty in your home were worth getting a home warranty policy to begin with and those systems still exist, it might be worthwhile extending your home warranty for another year.
Is there a deductible for home warranty claims?
Usually you do pay a service fee for the technician to go out and diagnose the problem so in a sense there is a deductible for each service call.
The technician then determines if the item needs repair or replacement and that cost is what is typically covered by the home warranty.
Are home warranties a scam?
Some people use the word scam in a general sense to describe something they don't believe is good value. Some people would argue that if you pay money for something (like a home warranty) and never use it, that you've been “scammed” out of money.
I think that a home warranty does provide a valuable service. It is true that you could pay for a home warranty and that nothing with your home could go wrong and that you could never make a claim. On the other hand you could pay for a home warranty and save yourself thousands of dollars if things do go wrong and it is covered by a claim.
Also, there are probably some home warranty companies that are more reputable and reliable than others.
So, home warranties in my opinion are not a scam and can, in some cases, be a good value.
Should I get a home warranty with new construction?
Some people would argue that buying a home warranty on a new construction home doesn't make any sense. They'd argue that everything is brand new and that most builder's include a one year warranty themselves. Where's the value in buying a home warranty policy in addition to the builder's warranty?
Well, the home warranty policies I've seen (and some very astute investor buyer clients of mine have purchased) usually cover more items than the builder warranty covers and for a much longer period of time. The client I am thinking of purchased a 10 year home warranty on several new construction rental properties they purchased for about $1,600. They've now got all the major systems in their rental properties and appliances covered for about $160 per year.
Who pays for the home warranty?
Anyone can from the buyer to the seller, to either real estate agent in the transaction. A legacy Nomad parent could even purchase a home warranty as a gift for their child purchasing their Nomad properties.
Should I provide a home warranty when selling a home?
Some sellers, and I would agree with them, that there is some liability in selling a home and having something unexpected break once the buyer moves in. Occasionally, a week after moving in the furnace or air conditioning fails and the buyer thinks the seller knew it was going to happen (which they did not).
To prevent buyers feeling wronged when the unexpected happens sellers have purchased home warranties as a way to protect themselves and provide a valuable protection and peace of mind to their buyers. If something goes wrong within a year after the sale, they can call the home warranty company and for a small service fee has the problem repaired or replaced.
Does the real estate agent pay for the home warranty?
In some transactions, the real estate agent representing the buyer or the seller will offer to include a home warranty. Some real estate agents include this as part of the service they offer.
I personally do not automatically include this as part of the service I offer. However, in extremely rare situations depending on the particular house and whether I believe a home warranty would be a good investment and the relationship I have with the client, I may offer to personally pay for a home warranty for the client. For example, if there is a first time home buyer really stretching to buy their first home and they're buying a home that has many of the major systems toward the end of their lifespan, I'd prefer to know that they're not going to get hit with an unexpected furnace repair or replacement within their first year. In that case, I may opt to give a home warranty as a closing gift.
Do I need to get an inspection to get a home warranty?
It depends on the home warranty company. I know of at least one company here in my market in Northern Colorado that if it is a sale, they do not require an additional inspection to provide you a home warranty. However, if you're trying to buy a home warranty on an existing property you own, I think they would require an inspection.
Will a home warranty cover a roof?
While some home warranty providers may cover roofs or roof leaks in their normal plans, the ones I am aware oif do not include roofs or roof leaks in their normal plans. It is available as an additional upgrade though.
Will a home warranty cover a furnace?
It depends on the home warranty company, but most will cover a furnace in their standard plans.
Will a home warranty cover an air conditioner?
Again it depends on the home warranty company but some will include air conditioning in the basic plan. Others may require you to be in their higher level plans or to add it on as additional coverage to include air conditioning. You'll want to read the plan carefully.
Will a home warranty cover a refrigerator?
Are you noticing a pattern here when I say it depends on the home warranty company? Most home warranties will include refrigerators in their basic plan.
Will a home warranty cover a stove?
Most will include coverage of a range/stove but you will definitely want to check the policy you're buying.
Will a home warranty cover a microwave?
Many home warranty companies will include coverage for built-in microwaves (not stand alone counter-top microwaves). Of course, you'll want to check to make sure it is included in your policy.
Will a home warranty cover a swimming pool?
Most home warranty companies will not automatically include coverage for a swimming pool. Most will offer coverage on a swimming pool for an extra fee.
Will a home warranty cover a washing machine or clothes dryer?
Some will, some won't. Some will require more than the basic plan to include a washer and dryer.
Will a home warranty cover a flood?
Not usually. There is separate flood insurance you can buy to cover floods.
How long does a home warranty cover?
It depends on the plan that you buy. Many home warranties are sold and cover a period of 1 year.
Are home warranties transferable?
It depends on the plan. You would need to read your policy to see if the home warranty is transferable should you sell the property.
Should I get a home warranty on a fixer upper?
Maybe. If you're planning to buy the property and immediately rip out all the items that are normally covered to replace them with brand new items, then buying a home warranty is probably not a worthwhile investment.
However, if you're going to fix up certain things and the things that you're not going to fix up are things that would be covered, it might make sense to get a home warranty on a fixer upper. On one flip that I did with a partner, we did not replace the furnace, but provided the buyer with a home warranty at the time of sale. It turned out to be a great investment for the buyer (even though we paid for it) because he ended up getting a brand new furnace out of it.
Am I required to get a home warranty?
Nope. Home warranties are optional and are not required.
Where do I buy a home warranty from?
You can search for home warranty providers on the web in your market or ask your real estate agent. Most home warranty company representatives are trying to make sure that real estate agents know about them and their offerings.
Does the real estate agent get a kickback or commission if I buy a home warranty?
Not usually; it would be really uncommon if they were. And… if a real estate were to get a kickback or commission for you buying a home warranty, it would need to be disclosed to you in writing to comply with RESPA.
How do I make a home warranty claim?
You'd contact the home warranty company on the paperwork you were given (usually at closing).
Is a home warranty the same as the builder's warranty on new construction?
A home warranty is not the same as a builder's warranty. They often cover different things as well.
Should I document all conversations with home warranty companies?
Yes, whenever talking to an insurance company or financial institution it is always a good idea to document the date and time of your communication, who you spoke to you (especially if you talked to several people or departments), what was discussed and what the agreed outcome was.
If you have a CRM, you might want to document these conversations in your CRM. If you do not have CRM, then you may want to document your notes in journal or notebook. If you don't have a journal or notebook, the last resort would be to use sheets of paper and store them in the file where you keep your related home warranty documents.