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Home Warranties: Big Bonus or Totally Bogus?

We’ve always told you that you can’t ride two horses with one ass but when it comes to this topic… we’re straddling the saddles. Like all Real Estate decisions, we’ll give you the info and let you determine whether or not a home warranty is a must when purchasing your next home. 

When you buy a home warranty, you’re basically buying an insurance policy – that’s legally structured like a service contract. And unless you’ve been smoking in the car with the windows rolled up your whole life then you know that insurance companies are in business to make money. They expect to make money on the average policy they sell, which means that on average the people who buy these policies will lose money. Buyers will most likely pay more for the policy than they receive in return over the life of the policy. Hopefully the seller is paying for it!

 Reliably unreliable

Something breaks, you call an 800 number and they send someone out to diagnose for a $75-$100 charge to you, and it could take several days for you to snag an appointment. They are going to do everything in their power to spend the least amount of time and energy on the problem so don’t expect them to come waltzing in with a brand new hot water heater when you notice some rust at the bottom.

 Who’s the boss? 

Follow. Da. Money. These guys are not going to be yes-men. They work for the home warranty company so they aren’t going to follow your instructions or any other SOP. 

 Hope you like band-aids

Replacing appliances ain’t cheap and that is always their last resort. You’d be surprised how many stops there are along the way to that last resort too. They are experts in polishing turds.

 Caveat emptor… particularly when it comes to exemptions

Like reading contracts? Home warranties can be lengthy and hardly a thrilling read. However, familiarize yourself with these fun exceptions: pre-existing conditions, accidents, covered item dollar limits, incidental damage resulting from the malfunction of a covered item, and the list goes on…. nice, huh? We had one buyer client call about a plumbing leak that damaged a ceiling and the contractor said that they “don’t fix ceilings.” So, there’s that.

They cost approximately $600/year, and if you don’t have a relationship with a handyman or contractor that you trust, it is not a bad idea to negotiate a home warranty into your purchase agreement for the first year of homeownership, and use that time to find someone dependable.

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