In my property management business, I deal with a number of investors that have bought and sold properties for a long time- as well as homeowners that have leased their homes for a number of years and are well-versed in just about every facet of landlord-ship. A vast majority of owners, though, are ones vacating the home they're looking to rent out. These are the folks that have the most questions about the rental process and need the most guidance- and one question I'm often asked is whether the owner should purchase a home warranty.
I've had experiences both good and bad with warranties- American Home Shield, Old Republic, etc. I've had prompt service and slow service. I've had work orders dispatched to vendors I routinely use and love, and some dispatched to vendors I'd sworn I'd never use again. All told, I've seen enough of the good and bad that I feel pretty comfortable in giving my clients a fair answer.
In deciding whether to purchase a warranty, I tell them to consider the following:
- Age of home and its appliances. If a home is new and/or its appliances are new, there's a good chance that a problem arising right away will be covered by either a builder's warranty or a manufacturer's warranty. Just as you don't need to buy insurance on a rental car if your "regular insurance" covers you, there's no need to rush to get a home warranty and find yourself doubly-covered.
On the flip side, you should give a warranty serious consideration if your home or its appliances are old. It's neither fun nor cheap to repair that A/C that's "on it's last legs" when you leave your home and gets that last leg knocked out from under it a short bit into a tenant's lease.
- Quality of your appliances and value of home. The higher the quality of an appliance, the higher the repair costs. More consideration should be given to a warranty as the quality of appliances rises. It makes precious little sense to purchase a warranty if all of your appliances can be replaced with a year's premiums!
- Price of warranty and it's coverages. In short, read your contract. I won't say that any warranty plan is a scam or rip-off as I've heard many say. Warranty companies I've dealt with have always lived up to their contracts. The problem lies in the fact that many policyholders don't read the contract. They assume things are covered (and we know what that gets them), only to have something break and find that it's not. Pay particular attention to the exclusions- it's great to have a dishwasher replaced, but don't get blindsided when you're told you have to pay extra to have the dead one removed.
- Ask about vendors the warranty company uses. Check reviews on some of them and see what others think. Find out whether you can use different vendors that the warranty's preferred ones and still be covered. Some have "out of network"-type deals where you can use a licensed vendor of your choice for an extra charge.
Home warranty or no home warranty? It'll always be a bit of a tough question- but with a bit of homework on the owner's part and soild guidance from a professional property manager it won't be too hard to answer.
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