About a month ago I wrote about a home warranty and how one failed my buyers.  Many people have contacted me asking for an outcome of the situation.  This has been a big lesson and one I hope some of the agents, buyers and sellers can learn from this post rather than having to go through the troubles we have.

It is common in Central Oregon to find a home with a heat pump.  It is also common to find REALTORS® and sellers offering a home warranty as an incentive to purchase one home over another.  One of the most common home warranties is AHS (American Home Shield).  I know a lot of us use this program and many of us have had good service and representation with this company. 

Did you know that AHS does not cover geothermal heat sources or any of the components of such a system?  Did you also know that you can not receive a copy of the actual policy until it is paid for, which here is typically a week and sometimes two from the close of escrow?  At that point they mail -  yes snail mail the policy and the option to add additional coverage to the policy - that option is only good for 30 days from closing - so 2 weeks have been eaten up with the company processing paperwork - then a third week in getting the policy to the new owner.  If the new owner does not intend to live at the residence full time - you might want to call the company and confirm the proper mailing address.  AHS assumes that the new home is where the policy should be mailed - can you see a problem with this system?

So, I represented a buyer that purchased a beautiful second home on The Deschutes River.  We wrote the offer that included a water test, a septic pump and inspect and a home inspection and verification of zoning for a portion of the land which we though to be wetlands.  The buyer attended the home inspection, and the septic pump and inspection, keep in mind that the buyer lives 4 hours away when the roads are not covered with snow.

We received a copy of the property disclosure and saw no issues.  The home inspection showed a few items that the seller quickly agreed to have repaired.  The home inspection also reveled that the heating system was "complex" it is what is called a water furnace. 

The inspector inspected the furnace to the best of his ability and explained to the buyer that the furnace was beyond the scope of his inspection and that he was not familiar with this particular type of furnace.  His report indicates it may be a good idea to have a qualified HVAC specialist look at they system if he had questions, but that the furnace was putting out adequate heat at the time of inspection.

The transaction is not the smoothest I have ever completed, but we are able to work through several issues, a leaky septic tank, and some electrical issues and so on.  In the end we work our way through them one by one and all is done prior to the closing. 

We close escrow on November 1 and the buyer has allowed the seller an additional 20 days rent back to make moving easier.  Thanksgiving weekend comes and the new home owner arrives late that evening to find the home extremely cold, they turn up the thermostat and you guessed it nothing.  The buyer is not worried - he has a home warranty and an agent that has assured him that the relationship does not end with the close of escrow.  The next morning he calls me and we call AHS only to find the warranty which we do not have a copy of does not cover any geothermal heating systems.  GREAT!  I call a trusted local HVAC company that agrees to go out on the holiday weekend for a very reasonable cost to check the system.  They arrive, and presto a few wires have burned through they are replaced and we all think - wow that was easier than we thought it would be. Did you get the date there - November 20 -

Today is December 31, and guess what - yep you guessed it the furnace is still not working correctly - HVAC costs are up over $2000 a plumbing bill of $550 and now possibly a well re-drill estimated to be $2,500. Had we known the heater would not be covered on a home warranty or that the seller had had these same issues in the past do you think this would have been the home my buyers chose?

If any of you know of a home warranty that covers geothermal systems please let me know - because once this issue is completely resolved, I am fairly certain this home owner will want a warranty.

To make this even more frustrating it appears the seller's agent may have known of this issue, because when I contacted him about these issues back in November, his response was, "your buyer may be SOL" makes me want to deal with him again for sure.

Any suggestions on a better home warranty for heat pumps are appreciated.

additional information added -

warranty companies feel that any heat pump is geothermal - in the Pacific Northwest it is common to have a heat pump that provides heat in the cooler months and AC in the warmer.  These units use the heating and cooling of water to create heat - hence they are geothermal