Home Warranties: Which One Is Right For Me?

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Groundhog Day


Well, here we go again.  Would you be surprised if I told you it’s looking like another hyper-competitive Spring housing market?  If what we’re seeing now is indicative of what’s to come throughout the remainder of the year, many buyers could be in for multiple offer scenarios, paying over list price, and forgoing inspections to purchase their home.  Regarding that last point, there’s really no need to freak out, we have some timely information for you!  As a buyer you do have a viable option to alleviate some of the risk you’re taking on.  Let’s talk about Home Warranties, shall we?  What are some of the nuances to consider when comparing the typical home warranty companies vs what might be available from your local utility company?


The Basics


Let’s first talk about who can buy a home warranty. Home warranties can be purchased by either the seller or buyer, typically prior to closing.  Just like other warranties, you pay upfront for the added protection of certain items in your home, like appliances, plumbing, and electric.  Often, there are packages or tiers of coverage, the more comprehensive the higher the cost.  There is a service charge to have a technician come out should something go wrong during the warranty period.  They will try to repair whatever needs fixing, and if that attempt fails, the next step is usually replacement.


All Are Not Created Equal


Sounds like a solid proposition, right?  This is where I want to emphasize a key point: the devil is in the details, and you really need to exercise your due diligence here, especially if you’ve received a seller-provided warranty.  Some pertinent questions to ask include what specifically is covered, and how long you have to be into the service contract to receive a replacement if needed. It’s also important to ask if pre-existing conditions are covered, what kind of reputation the company has, and if they will be fair to deal with should something come up.


The Differences


Let’s dig a little deeper into which option might be best for you.  Starting with the national home warranty companies, you can think of these as usually more expensive and more comprehensive.  Some may cover pre-existing conditions or have unique perks such as spot roof coverage.  While occasionally you may need to nudge them along, they will replace covered items early in the warranty term if it comes down to that.  


The warranty provided by your local utilities company is a little different in a few key ways.  You can pick and choose (a la carte) what items you’d like covered, which is nice if some mechanicals in your home are fine while others are at the end of their service life.  They are less expensive and can often be paid monthly, and from our experience they are easy to work with should you have a claim.  One negative to consider, however, is that they typically won’t offer full replacement until you’ve been enrolled for one year. 


Is It Worth It?


We get asked this question frequently, and there really isn’t a right or wrong answer per se.  I like to tell people it’s a case by case consideration, and is dependent on the person and the property.  Are you risk tolerant or risk averse?  Are you the type that signs up for extended warranties on other big ticket consumer goods?  Is the house full of character, but old as the hills?  Is the house new-ish, or still under manufacturer/builder warranty and unlikely to have mechanical failures?  Have a conversation with your realtor regarding options, and we’ll devise a plan best suited to your specific situation.