In our market, homebuyers (or their agents) will often request that a home seller provide a home warranty as part of the sales contract. It’s like an insurance policy for some of the bigger ticket items in a home that you wouldn’t want to fail. For instance, home warranties for existing homes typically cover mechanical systems and appliances, and, in our market, at least, can be purchased for around $400 or less (depending on the home).
It’s a small price to pay for peace of mind, right? Knowing that you won’t have to come 100% out of pocket for a new refrigerator or A/C system in a home you just bought is a comforting thought, after all.
But there are some caveats. Home warranty companies are in business to make money, after all, so homebuyers should be aware of a few things up front:
Getting a replacement at no cost is highly unlikely
If you’ve secretly been hoping that the 20-year old, avocado-colored refrigerator that came with the house would go on the fritz so you could get a new one, don’t hold your breath. If the warranty company can fix it (even if it’s with tape and baling wire) for less than the cost of a replacement, they will. Of course, you’re free to purchase a new fridge on your own…just know that the warranty company will only reimburse you for the cost of the broken part on your old fridge.
You’ll work on the warranty company’s timeline, not your own
You’ll have to use the warranty company’s vendors, who may be based miles away in another town or city. So you may wait a day or two just to find out what’s wrong with your item. They’ll then have to report back to the warranty company, and you’ll wait another few days until a determination is made on how to address the problem, and what’s covered. All told, you may go a week or more before your issue is addressed. That’s a long time if, for example, your refrigerator or A/C goes out. In August. In Florida.
You have little control over the process, or your options
Just as you’re working with the warranty company’s timelines, you’re working with their rules. So even if you feel the damage to your appliance/system warrants a full replacement, if the company disagrees, you’re out of luck. Likewise, you can’t choose the vendors you want to diagnose or fix the problem, or when it will get done. In short, if you’re a Type A person, you’ll likely be frustrated.
I’m not trying to bash home warranty companies. In fact, I think the coverage they provide can be very useful. If you lease your home to a renter, for instance, a home warranty can help protect you from large cash outlays in the event of a system failure. If you have a second home or vacation home, it might make sense for you to have your appliances and systems under warranty. And, yes, even a homebuyer purchasing an existing home may want a little extra protection from unforeseen expenses for the first year in the home. And a home warranty can provide that.
But there are tradeoffs with a home warranty. Or any insurance product, for that matter. The key is to make sure we go in with our eyes open, and that our expectations are set appropriately.
Have an experience with a home warranty company that you’d like to share? Post it in the comments section…