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Home Warranty Companies, Are They Worth It?

Mortgage and Lending with Be My Neighbor Mortgage 206672

September 29, 2009 12:18 PM

What is the true cost of a home warranty versus paying for repairs yourself? Is it worth it?

Here are my numbers.

Home purchased in March 06, warranty paid for 1 year by seller. I continued the warranty on a monthly basis at $47 for piece of mind. My home is 16 years old.

Year 2, AC broken, cost of part $1800; labor $200

Year 3 relay switch on thermostat broken $250

Today broken water heater total replacement and initial diagnosis cost $600. Yay brand new one!

Total cost of repairs excluding some labor time was $2,850, I've paid $1410 to the warranty company in monthly dues and $60 deductibles for each occurrence.

I've saved $1260 over the last few years.

I highly recommend you encourage buyers to extend the home warranty on homes 10 years or older. It's not a bad idea and definitely worth the piece of mind.

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Gloria Laughton Allston

COLDWELL BANKER RESIDENTIAL BROKERAGE - Princeton, NJ

Realtor(NJ)/Broker(NY)

I totally agree with you Melissa and I am usually able to convince buyers and sellers that the "insurance" is worth it on older homes.

Sep 29, 2009 12:25 PM

Diane Donnelly

Keller Williams Flagship - Annapolis, MD

Anne Arundel County, MD Real Estate

It is almost standard practice to give or get a home warranty with the sale of the home. It is great peace of mind for the buyer also.

Best,

Diane

Sep 29, 2009 12:36 PM

Gary Coles (International Referrals)

Venture Realty International - Las Vegas, NV

Latin America Real Estate

Melissa, I am totally in agreement. I almost always convince my clients of the need. One great place is with property management. Have the tenant be responsible for repairs up to the deductible amount and give them the warranty company number --- what a relief for a property manager. One thing, check around to find out how responsible the home warranty company is. In Las Vegas, it was practically impossible to get service from American Home Shield.

Sep 29, 2009 12:38 PM

Shirley Parks

Sands Realty 210-414-0966 - San Antonio, TX

Broker, 210-414-0966, San Antonio TX Real Estate

We have American Home Shield. We have lived in our current house for 5 years and have used it to replace a hot water heater and a dishwasher. So we have spent more on the home warranty than we have gotten out of it but it is worth it to know that we have it in case we need it.

I would like to know if Consumer Reports or anyone else has ratings on the various home warranty programs.

Sep 29, 2009 12:53 PM

Melissa Anderson

Be My Neighbor Mortgage - San Antonio, TX

Your Texas Lender

Shirley,

Thanks for the comment, I wonder if the monthly fee is worth it for everyone? Certainly young first time home buyers with limited budgets and folks with older homes/equipment.

Your comment is exactly why I decided to do the math tonight. It is working for me, but now that 2 big ticket items have been replaced, perhaps I might not need to continue paying for it.

Of course tonight, I'm happy for a hot shower and that I did not spend $$ that I did not anticipate.

Sep 29, 2009 01:11 PM

John Mulkey

TheHousingGuru.com - Waleska, GA

Housing Guru

Melissa - While I don't have the exact statistics, I have had experience with several warranty companies. Of course if they were a good deal for every customer, the company couldn't be profitable--that's really the bottom line. It's a gamble. The homeowner is betting they will spend less than they receive in benefits, and the warranty company is betting they will pay out less. Overall, the company wins.

However, if a homeowner isn't able to budget for a major repair, then they should consider the warranty for peace of mind. The other significant issue is the warranty company itself. Service varies widely, and homeowners need a reputable and reliable company.

Sep 29, 2009 01:32 PM

Charles Stallions

Charles Stallions Real Estate Services - Pensacola, FL

850-476-4494 - Pensacola, Pace or Gulf Breeze, Fl.

We have Old Republic but it is the rep that makes it work. Farris Powell is the best and will take care of you. He is really that good and so easy to work with.

Sep 29, 2009 01:44 PM

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Melissa Anderson

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