With so much discussion about buyers wanting 'move in ready' homes, might home warranties be a possible option?
What is a Home Warranty?
A home warranty is essentially a service contract purchased to cover the costs of repairs or replacements of a home's major systems like the furnace, air conditioning, plumbing and electrical systems. You can also purchase warranties that cover appliances like the refrigerator, microwave, washer and dryer. Most plans offer different levels of coverage depending on what you want to cover and what you are willing to spend.
Here's how it works:
When something that is covered breaks down, you will contact the home warranty company. They will send one of their approved service providers to your home to determine if the repair or replacement is covered by the warranty and will complete the work. You will pay a service fee (approximately $75 - $125) each time a service provider is called for a repair.
Costs:
Home warranty plans typically cost several hundred dollars per year, paid up front or in installments. The cost depends on what kind of home you live in, whether it is a single family house or townhouse/condo, and what you want covered in the plan. The size of the home usually does not increase the price unless the home is more than 5000 sq. ft. Also, the age of the home (unless it's new construction), systems or appliances are usually not a factor in determining the price of the plan.
Pros:
As a home buyer, the home warranty can provide you some peace of mind. The warranty can save you money when you have an unexpected costly repair and save you time in finding a contractor to take care of the problem. Warranties can also provide reassurance to home buyers who won't know whether the systems and appliances have been properly maintained. Home sellers can benefit by offering a one-year home warranty (paid up front) to potential buyers particularly if the home competes with new construction in the area (new homes by CT law are sold with a 1-year builder warranty).
Cons:
One common problem of home warranties is some don't provide the coverage when it's needed. The company may refuse to cover an item that has not been properly maintained. This "proper maintenance" issue can be a gray area and is the source of many complaints of warranty holders. Another common complaint is the warranty companies have dollar limits per repair. The maximum amount they agree to pay for a replacement may not cover the entire cost. Home warranties can definitely be worth the money you pay each year when you have expensive repairs; however, there will be some years when nothing breaks down.
The home warranty is not perfect but can be beneficial. Make sure you read the fine print and have a good understanding of how the plan works. Know what it covers and what it doesn't cover. Also, know the maximum dollar limit the company will pay for repair or replacement. Finally, make sure you understand what "proper maintenance" means and how it is determined by the company. When choosing the company, do careful research and read the reviews to make sure you are choosing a reputable company who will cover legitimate repairs.
Comments