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Home Warranty - Update - Help Appreciated!!!

By
Real Estate Agent with West + Main

 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

Comments (16)

Maggie Dokic /Indialantic | 321-252-8696
Magdalena Dokic - Indialantic, FL
Selling the beach in Florida's space coast

Thesa, I remember your post and am glad you provided an update.  I am still surprised at the whole thing.  AHS is the one I see the most here and from their riders, you'd think the peace of mind would be warranted.  (pardon the pun, it really wasn't intended)  At the very least, I will take these with a grain of salt in the future.

Happy New Year!  (you are my very first comment of 2008!)

Dec 31, 2007 03:05 PM
Thesa Chambers
West + Main - Bend, OR
Principal Broker - Licensed in Oregon
Randy - I am honored and thank you for following this - I really do not blame AHS except that their customer service on this one was bad - but in general they are what they are - this has just been a 2 month nightmare and now with snow on the ground it will continue until spring - joy of joys
Dec 31, 2007 03:11 PM
Deborah Burns ~ Seattle Real Estate Agent
Realty Executives -BRIO - Seattle, WA
What a major headache for your client, not the "piece of mind" your client was looking for, nor you.  I have not heard of a geothermal heating system before.
Dec 31, 2007 03:16 PM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Thesa, I reallly like Old Republic but as to whether they cover a heat pump I would not have a clue.  They have been good to my clients though. 

Happy New Year!!

Dec 31, 2007 03:25 PM
Thesa Chambers
West + Main - Bend, OR
Principal Broker - Licensed in Oregon

Deborah - it has been a pain - and it has been painful - but this too shall pass.

Marchel - I will check them out thank you! Happy New Year to you too!

Dec 31, 2007 03:28 PM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Yikes Thesa,

I have not used AHS in a long while. I have used First American a few times. Do not know what their policy coverage is.

Last time I needed to find a company I searched the Internet and Forwarded the Links to my Client. They made the choice after reviewing the policy.

Thanks for head up though.

 

Dec 31, 2007 04:50 PM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Yikes Thesa,

I have not used AHS in a long while. I have used First American a few times. Do not know what their policy coverage is.

Last time I needed to find a company I searched the Internet and Forwarded the Links to my Client. They made the choice after reviewing the policy.

Thanks for head up though.

 

Dec 31, 2007 04:51 PM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection
Thesa _ What a mess, I too remembered your original post.  Sorry I don't have a recommendation for you. 
Dec 31, 2007 05:50 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Tesa, I've used HBW VI for many years and have never had an issue with them not fixing something. As soon as the contract is negotiated and accepted I call in the warranty. The policy will then go into effect at that time(prior to being paid) I will get a policy number and hard copy policy docs prior to closing so the buyer has plenty of time to review the paperwork and make additions if they need to.

You can also activate these warranties at time of listing for no cost.  It will protect your seller from a major repair during the listing period. Hope this helps

 http://www.2-10.com/

 

 

Dec 31, 2007 11:24 PM
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Thesa, this is really a good heads up for all of us.  What I don't understand is how can this company NOT provide a copy of the contract for all to see before paying for it?   Do they not have an informational brochure with the inclusions/exclusions?   (Every one that I've seen here in our area has this.)

What an awful experience for your buyers.  I'm so sorry this happened to them. 

Dec 31, 2007 11:53 PM
Lucky Lang
Premiere Plus Realty Marco Island - Marco Island, FL
Marco Island & Naples Florida Real Estate

Thesa,

It is really sad when communication failures (not receiving proper documentation) give buyers and sellers bad experiences.  All warranties have exemptions of coverages.  They have to or no one would want to pay what the warranty company would have to charge for total coverage.  The problem with your situation (and many others that I have seen) is when the coverage is not communicated. 

Frequently, home warranties do not cover anything outside of the foundation for sewer work, have limits for appliance replacement (both cost and age), and some (like AHS) don't even cover faucets! 

With home warranties becoming more often used than not, we must start demanding copies of coverages for our clients or find ourselves in the middle of litigation.

Thanks for the update and have a GREAT 2008!

Lucky :)

Jan 01, 2008 01:57 AM
Karen Kruschka
RE/MAX Executives - Woodbridge, VA
- "My Experience Isn't Expensive - It's PRICELESS"
Thesa I find this surprising.  Heat pumps are very common here in Northern Virginia and I am not aware of any warranty carrier that excludes them,  Karen
Jan 01, 2008 02:02 AM
Teri Eckholm
Boardman Realty - White Bear Lake, MN
REALTOR Serving Mpls/St Paul North & East Metro
Thesa--I have my clients review the fine print before purchasing a home warranty. Many past clients have been frustrated with experiences similar to this with things that are not covered. Some clients love the warranty program and consider that it saved them hundreds of dollars. What a frustration! Hope it is resolved soon.
Jan 01, 2008 02:31 AM
Thesa Chambers
West + Main - Bend, OR
Principal Broker - Licensed in Oregon

Herb - Just an FYI - First American does not cover heat pumps either - thus far I have checked several companies and they do not cover them in general - this warranty was provided by the seller - so it was their choice not ours.  Happy New Year - nice to see you back - I see you are headlining downtown area - good for you!

Jennifer - thanks for stopping by- nice to see you

Bryant - 2-10 does not cover heat pumps either - thanks though - and this warranty was exactly what you describe - it took effect at the time of listing - but AHS has a seller's policy and a buyer's policy - the hand out they provide does give some of the exclusions but not all of them.  The actual coverage is not provided until the policy is written at the time of closing - and then you have to wait - my buyer actually did not receive the policy until after the 30 days due to the fact the warranty company did not send the policy to the right address - even though they had the right one - they assumed the new home would be the new address. 

Kris - they do provide a brochure which gives a good idea of what the policy will cover - but it does not go into the finer details - such as a water furnace is not covered.

Lucky - it is frustrating and a good lesson - about 40% of the homes I have sold over the last 3 years have had heat pumps - which would not be covered - so, now I know and now I will be certain my buyers and sellers know also.

Karen - you might dig into this - since most of these companies do not cover heat pumps - I have yet to find one that does - I googled home warranties and then called about 15 of them - not one thus far will cover a heat pump - I did send an email last night to Old Republic which Marchel recommended and have yet received an answer.

Teri - the fine print on the paperwork we had to work with said nothing - it was the actual policy that gave the details we needed and because of the time frames for the policy to be mailed we had no idea.  However, after researching this - we did find that it seems to be the standard policy for a heat pump not to be covered - so to the company this was a normal exclusion - to us a huge surprise.

 

Jan 01, 2008 03:32 AM
Anonymous
Beth

I realize this blog post was from quite a while ago, but I see that AHS (american home shield) ovvers coverage for geothermal in their coverage plus package.

Dec 15, 2011 01:43 AM
#15
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

wow, what a story!....

I never had this, but now I'm going to check home warranty more carefully.

Thanks Thesa for sharing and heads up.

Jan 31, 2014 04:37 PM