What is a Home Warranty and why is it needed

27 May 2020

The process of buying your own home never goes without stress. Buyers have many different concerns. For example, questions arise about legal registration, financing of the house, and its verification. Of course, there is not much that can relieve the stress associated with buying a property, but there are some steps you can take to keep calm and minimize this stress for buyers, sellers, and real estate agents. One of these steps is to have a home warranty.

What is a Home Warranty

A home warranty is such a policy that applies to the specified packaging of household appliances and systems if they break, and also covers the cost of repairs.

Home warranties provide financial protection for homeowners from a service provider should they encounter unexpected problems with their home appliances. Moreover, it protects not only the buyer of the property from unexpected replacements and repairs but also the housing agent and the seller himself. 

It should not be confused with homeowner insurance, which covers homeowners from hazards such as floods, fires, and more.

What does a home warranty cover

What is a Home Warranty and why is it needed 1
Home Warranty

Do not accept a guarantee for insurance of property owners that covers property and the structure of your value in case of fire, flood, storm, or other situation. In contrast, home warranty companies will cover the replacement of home systems and repairs, including a washing machine, plumbing, kitchen appliances, and electrical systems due to normal wear and tear.

Companies such as the Home Service Club and the Choice Home Warranty, which are engaged in guaranteeing to house, usually enter into a service agreement covering the following items:

  • Major home systems such as electrical and plumbing
  • Cooling and heating systems, including water heater
  • Household appliances such as dryer and washing machine
  • Kitchen appliances such as a built-in microwave, oven, stove and garbage collection

It can be worth it if it covers even such large expensive problems as a leak in the windows, the roof, or problems with the pool. But in general, the things that the home warranty really covers depend on the company you are cooperating with.

How does it work

Imagine that you used a new washing machine that you purchased last year, and suddenly, as soon as the manufacturer’s warranty expires, it stops working. If you do not have a home warranty, replacing or repairing this problem can be expensive.

If you have a home warranty in one of the companies in this field, you can contact their support group and file a claim. Once a claim is received, the company must contact an approved service provider to evaluate the problem. Next, your washing machine will be fixed as soon as possible.

How about a seller who provides a guarantee on their own

It’s simple, the seller gives a guarantee if he personally promises to pay in order to fix any problems that you encounter with real estate in the first x months after purchase. However, such promises may not be kept, and you will have to fight in court for their fulfillment.

Therefore, if you need a home guarantee, then you can find for yourself one of the reputable suppliers of such services, and not just rely on the promise of the seller from whom you bought the property.

How much do warranty companies undertake

Despite all the benefits, home warranties are an optional purchase. Base coverage starts at about $ 300 and reaches $ 600 for more comprehensive plans. If necessary, the homeowner may include additions to the service contract, such as covering an external well or pool.

Also, in many companies, there are warranty plans that are of the “create your own” type. This means that you can set up a basic plan for specific systems like household appliances, plumbing, or you can enable additional add-ons, such as setting up for HVAC.

There is an opportunity to extend a home warranty or vouch with a new service provider at the end of the first year.

What should buyers look for in a company that provides such services

The first thing to do is find out if the company has a real call center office. Be sure to check all the information and reviews, so there are fraudulent cloud companies that can be managed by someone just from the apartment.

The National Home Service Contract Association has a home warranty accreditation program and member companies must have a 24-hour call center and comply with government regulations.

Find out if it has claim offices in your area and asks your real estate agent or realtor about her or his experience working with them. You should take into account that the claims department can be very regional.

Ask your agent or realtor about the claims on the reputation of the company providing the guarantee of housing and compare the coverage. As a rule, they are aware of which firms take better care of their customers and pay claims.

Mistakes that should be avoided when buying a home warranty

One of the mistakes you can make with such a purchase is not to read the fine print. Buyers assume that objects are covered when they are not. Another mistake is the assumption that each part of the device is closed. There are cases when it is not. For example, a refrigerator cover often does not imply the maintenance of an ice maker.

Also, some users do not pay attention to the limits on such a guarantee. Be sure to review this information in small print to see how much the housing guarantee company will cover for replacement, repair, and maintenance.

Do I need a home warranty?

According to the National Home Service Contract Association, on average, owners of such contracts file 1.5 claims per year. Internal guarantees are used quite often.

In order to understand whether you need a home warranty, you should consider the condition and age of the various systems and devices in your home. You must also remember that the home warranty does not cover existing cosmetic problems and wear. A warranty will help replace or fix covered items, but there are limitations. In the event that these products are new and covered by manufacturers’ warranties, you will not be able to use a home warranty to pay for repairs.

Take an inventory of your home systems. You should know that the house can break. Keep in mind the cost of replacing or repairing each item and determine whether a home warranty can cover them and how policy can help you if something breaks.

How a home warranty protects the seller

Home warranty
Home warranty

When a seller includes a home warranty in a commercial offer, most companies offer free listing coverage. This means that the seller does not have to pay for anything other than a service charge before the closing date. At the same time, if the buyer wants a home guarantee, the seller will pay for their plan.

In the event that the buyer does not request a guarantee, it is canceled before closing free of charge for the customer.

Such a free listing can cover the problems caused by verification if they are caused by normal wear and tear or age, which will help sellers save money.

If sellers do not choose the home warranty that they want to be listed, the buyer may request a much higher cost of a home warranty. Therefore, they also choose the price of a home guarantee.

In addition, according to a study by the American Home Shield, a housing guarantee sells a home faster and for a lot of money. This is most likely because the buyer feels more secure when buying a home with a guarantee of home protection.

As the homeowner looks at these houses and compares them, and they see that one house includes a guarantee for the house, they feel more comfortable buying it because they know that they will take care of the breakdowns. Therefore, if you do not offer this, buyers begin to doubt and are afraid that something is wrong.

A home warranty can give you the assurance that you will receive help paying for a replacement home appliance or home repair. If such repairs are necessary, you can save on maintenance costs. A home repair company can also assist in finding a contractor to complete home renovation.

On the other hand, you may never need a service, or it may not save you a lot. This may also be optional in all cases. If you are buying a new home, you may already have coverage for any structural defects or home systems. If you buy new equipment, it may also have its own guarantees.

However, there is no way to know for sure if you need additional coverage, but home warranties can add peace of mind to you.

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