What Is a Home Warranty Plan?
What is covered under home protection plans?
A home warranty can provide peace of mind. The last thing a home buyer wants to worry about after closing is what could possibly break or malfunction in her new home. Since that can cover a multitude of items and systems, for peace of mind, it's a good idea to get a home protection plan. It's especially a good idea to obtain a home warranty if you're a first-time home buyer with no experience maintaining a home.
Who pays for the home warranty?
Now, whether the seller pays for the home protection plan and home warranty coverage or whether the buyer pays for it, will depend on your local customs. It varies. In many locales, it's normal for a seller to pay for the coverage because it's a seller benefit. Why? Because then the buyer won't be calling the seller after closing if something breaks. Many real estate agents will also give buyers a home warranty as a gift at closing.
How much does a home warranty cost?
They are fairly inexpensive, typically ranging from $300 to $500, depending on coverage. Home warranty companies sometimes run special sales and either discount policy prices or offer additional coverage for the same price. The policies are prepaid for a year in advance, at which time they expire and can be renewed by the homeowner at a slightly higher fee.
How do they work?
Although specific plans provide for specific types of coverage, most operate in a similar manner and contain common verbiage.
- If a home system or appliance breaks or stops working, the homeowner calls the home warranty company.
- The home warranty company calls a provider with which it has a business arrangement.
- The specific provider calls the homeowner to make an appointment.
- The provider fixes the problem. If an appliance is malfunctioning and cannot be repaired, depending on contract coverage, the home warranty company will pay to replace and install the appliance.
- The homeowner then pays a small trade service fee for the visit (less than $100).
Types of Coverage
Because all plans differ, you will want to ask specifically what is covered. Ask your real estate agent if upgrades are available. Pay close attention to whether the home warranty company will pay for repairs to make certain types of systems or appliances compliant with new regulations.
What if I disagree with the outcome?
Sometimes a service provider will deny a claim. (See below.) If that happens or if you are unhappy with the service provided, call your real estate agent and complain. Your real estate agent, if she has a good working relationship with the representative from the home warranty company that is covering your home, well, she can seek resolution for you. Agents all over the country might be very upset at this suggestion, but it works. If my client calls me with a problem, I call my home warranty rep, and she eventually finds a way to work out a solution acceptable to all the parties involved.
In short, don't take "no" for an answer! Call your real estate agent. Your agent might have leverage.
What is not covered?
- Outdoor items such as sprinklers
- Faucet repairs are not covered under all plans
- Not all plans pay for refrigerators, washers & dryers or garage door openers
- Spa or pools, unless specific coverage requested
- Permit fees
- Items broken prior to closing
- Exclusions noted in the policy
What can cause a denial of payment?
This is the thing that upsets a lot of buyers after closing when they are denied services for a repair. Sometimes it can seem like the company is actively looking for a way not to reimburse the homeowner, and that assumption, at times, can be accurate.
- Improper maintenance
- Pre-existing condition disclosed in a home inspection
- Code violations
- Unusual wear and tear
- Improper installation
General Coverage in a Home Warranty
- Air conditioning
- Furnace / heating
- Water heater
- Ductwork (to code)
- Garbage disposal
- Inside plumbing stoppages
- Ceiling fans
- Electrical systems
- Range and oven
- Telephone wiring
Because the coverage for a home warranty plan can vary from state to state and from policy to policy, ask to see a sample copy of a policy before you commit. You will find some homeowners swear by a home warranty plan and others loathe them.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.