Pre-owned homes often come with home warranties.
Whether buying or selling a home, knowing about home warranties can change the way you look at the sale. It is helpful to check out a company and study the home warranty policy to make sure you are getting the coverage you expect. A well-rounded policy can eliminate large repair bills for you or the person to whom you sell your home.
Identification
A home warranty is an insurance service policy that most often covers repairs or replacements of home systems such as plumbing, as well some appliances. Specialty insurance companies generally sell these policies to home sellers or buyers. Home warranties cover types of home maintenance that regular home insurance will not cover. The warranty company works with local contractors to service these contracts.
Types
There are two main types of home warranties: those provided by builders of new homes, and those purchased by buyers, owners or sellers of pre-owned homes. While buyers or owners may purchase a home warranty to protect their investment, sellers are interested in making the sale more attractive to prospective buyers. The purpose of new home warranties is to ensure that the house is built properly. On the other hand, pre-owned home warranties are designed to ensure that used homes stay in good shape over the course of the warranty period.
Considerations
Providing a home warranty can help you sell your home more quickly. Real estate broker Laura B. Kopple suggests in ConsumerReports.org that you fix old appliances and then buy a warranty to cover them for the first year. Likewise, if you are buying a home, a home warranty can provide you peace of mind. In fact, according to MSN Money writer Liz Pulliam Weston, 55 to 65 percent of homeowners who start out with a home warranty decide to keep it, possibly to avoid paying for costly repairs or to avoid arranging their own service calls.
Cost
As of 2010, the average cost of a home warranty is between $250 and $600. You will have to pay service call fees when a repairman or contractor comes to your home, usually $25 to $75 as of 2010. The true cost of repairs may be hard to assess, however, because many of the contracts have loopholes that exclude certain repairs or replacements. Also, the warranty company, in conjunction with the service contractor, will decide whether to repair or replace an item. Since you pay a service fee for each service call, there comes a time when it is more expensive to keep repairing items.
Warning
Be sure that if you purchase a home warranty you are dealing with a reputable company. If the home warranty is being bought for you by a seller, ask for the name of the warranty company and check whether it is licensed. In a May 20, 2009 press release, Commissioner Poizner of the California Department of Insurance warned that certain home warranty companies were operating without licenses. These companies were not dealing fairly with their clients, and were failing to pay claims as promised.
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