8 Things to Understand About Home Warranties

June 30, 2010 by  

3 Comments

Home warranties are a random add-on that often pops up during the chaotic closing period. Suddenly buyers are faced with the option to buy a warranty to “protect their home.” What does that even mean? What does it cover?

Kitchen Appliance Warranty

Warranties help protect you from things like kitchen appliances breaking.

Here are the essentials:

  1. Warranties usually cover things that aren’t generally covered by home owner’s insurance: air conditioning units, kitchen appliances, plumbing, and electrical items.
  2. Home warranties are different from builder warranties.
  3. The home warranty covers the cost of repairing the item (less a service fee of  $50 – 100). That means you must go through your home warranty company in order to arrange repairs.
  4. The warranty can cover both new and older items, but everything needs to be in good working order when you purchase the warranty.
  5. The seller often pays for the warranty as an incentive to the buyer. It’s not unusual for the buyer to pay for it, however.
  6. Warranties usually cost $350 – 600/year.
  7. Warranties vary hugely in what they cover and the quality of service, so shop around carefully, make sure you understand the warranty fully, and don’t get sucked into buying more than you need.
  8. Like most types of insurance, there are tons of loopholes and unpleasant  surprises when you file a claim. If you’re concerned about the quality of the home you’re buying, don’t let the existence of a home warranty sweep aside your doubts. Assume the warranty will provide minimal coverage, and proceed with caution.

Home warranties are one of the many tools a homeowner possesses to care for her home. They won’t solve all your problems or turn a money pit into a mansion, but they can be useful should your dishwasher break a week after you move in. Just be sure to read the fine print.

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  • coooorey

    Excellent topic and summary. First time home buyers especially get this mixed up with homeowners insurance. I am a big proponent of the home warranty. At least half of the buyers I have worked with have needed to use the home warranty in that first year. Sometimes in the first week!

    It is impossible to test and check absolutely everything in a home before you buy it, and the home warranty helps a lot. We’ve had buyers move in and then the air conditioning or fridge or garage door opener goes on the fritz in the first week. Their minds are so full of everything else they are dealing with, so we remind them to use the home warranty.

    Buyers should check with their agents. If allowed, agents often pay for the first year home warranty. And, in some areas, the seller pays for that first year.

  • coooorey

    Excellent topic and summary. First time home buyers especially get this mixed up with homeowners insurance. I am a big proponent of the home warranty. At least half of the buyers I have worked with have needed to use the home warranty in that first year. Sometimes in the first week!

    It is impossible to test and check absolutely everything in a home before you buy it, and the home warranty helps a lot. We've had buyers move in and then the air conditioning or fridge or garage door opener goes on the fritz in the first week. Their minds are so full of everything else they are dealing with, so we remind them to use the home warranty.

    Buyers should check with their agents. If allowed, agents often pay for the first year home warranty. And, in some areas, the seller pays for that first year.

  • Rebecca

    That's great info – thanks for clarifying who pays for what when. I don't
    even recall if I was offered a warranty on my condo, crazily enough. It's
    the sort of thing that gets tacked on in the middle of the most stressful
    transaction of your life, so it's easy to overlook!