Home Warranty - Waste Or Worth It?

By
Real Estate Agent with Howard Hanna Real Estate Services

 home warranties cover applicances

 

 

There are some who think home warranties are a waste of money, just another way for brokerages to profit off of consumers.  However, given the benefits to both buyers and sellers, perhaps they are a wise investment.

 

WARRANTY BASICS AND BENEFITS

I'll be honest, when I first got into real estate, I thought warranties were a waste of money. Over the years, I have started to have a new found respect for them as my clients have really seen beneftis.

In a basic sense, a home warranty covers you in the event appliances or major systems break down. In most cases, a warranty will cover things that your typical home owners insurance policy does not. Having both a comprehensive home owner's insurance policy and a home warranty will provide you will excellent coverage.

Most homes experience issues pertaining to mechanical systems and appliances on a regular basis. It could be once a year or every few years, you just never know when something will happen. That is why having the protection of a home warranty is a smart thing to do for both buyers and sellers.

FOR BUYERS

1. CONVENIENCE  - When covered by a warranty, you will have access to qualified contractors simply by calling an 800 #. This is especially nice if you are new to the area.

2. LONG-TERM PROTECTION - While a seller will typically pay for the first year of a buyer's home warranty, the buyer has the option of renewing every year. As your home ages, the likelihood of a problem increases. So for the long term, having a warranty can be a huge help.

3. PEACE OF MIND - There is a tremendous feeling of knowing you will be covered if certain problems arise.

FOR SELLERS

1. COVERAGE WHILE ON THE MARKET - You will get covered during the listing period and NOT have to pay for the policy until closing.

2. STAND OUT FROM COMPETITION - Offering a home warranty may entice a buyer to purchase your home over another that is not offering one.

3. ELIMINATES PROBLEMS AFTER CLOSING - If a problem arises after title transfer, it is better for the buyer to contact the warranty company instead of you.

 

DO YOU REALLY NEED ONE?

 

home warranty claims

 

We are not here to tell you what to do, but based on the chart above, claims are certainly a common occurrence. In fact, we get emailed every time one of our clients has a claim paid by the warranty company, and it seems like it happens all the time. From an agent's perspective, I do feel it provides tremendous value to both buyers and sellers.

When it comes to buying or selling a home that costs hundreds of thousands of dollars, spending $350-450 on a home warranty seems pretty minimal. If you think of a warranty as more of an investment than an expense, it will hopefully make  more sense.

 

If you liked this post, please subscribe to our blog. We always appreciate having new readers and more importantly, enjoy making new friends.

 

Here are some of our others posts that may interest you as well:

One Question That You Absolutely Must Ask Your Clients

5 Reasons Why Using A Local Agent Is Better

Cool Virtual Tool To Help Pick Out Paint Color

Is Social Media Killing Confidentiality?

Real Estate Agents Are Not Just Door Openers

 

-----------------------------------------------------------------------------------------------------------------

About The Authors:

Dan and Amy Schuman are agents with Howard Hanna, the area's largest real estate company. They live in Solon Ohio and specialize in Cleveland Luxury Homes, working with buyers relocating to Cleveland, and first-time buyers.

 

LET'S CONNECT:

 

Subscribe via RSS! Follow Me On Twitter! Follow Us On Facebook! Follow Us On Linkedin! Subscribe To Our Youtube Channel!

 

Home Warranty - Waste Or Worth It? is the property of The Schuman Team and may not be duplicated or used without their written consent. ©February 2013

close

Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 02/24/2013 07:56 PM
  2. Gabrielle Kamahele Rhind 03/03/2013 06:36 PM
  3. Lori Williams 03/03/2013 06:58 PM
  4. Charles Stallions 03/07/2013 09:12 AM
Topic:
Real Estate Best Practices
Groups:
Realtors®
Ohio Active Rainers
Advice for Sellers
Advice for Buyers
Tags:
buying a home
selling a home
home warranties

Spam prevention
Show All Comments
Rainmaker
440,430
Eric Crane -- Your Full Service, Discount Fee Realtor®
DPR Realty LLC - Gilbert, AZ
Greater Metro Phoenix Arizona

Hi, Dan and Amy -- good blog article.  I have noticed that there is a big difference in the level of quality and customer service between the various warranty companies.  Another area in which the client should do some homework and find a warranty company that actually delivers when something goes wrong.  all the best to you both and have a wonderful weekend!  Eric  

Feb 21, 2013 10:08 PM #3
Rainer
117,235
Linda Edelwich
William Raveis Real Estate - Glastonbury, CT
Glastonbury Office's #1 Top Producing Agent-not on

My daughter just closed on her first home - I insisted she have one in place - good thing she did, second day in the house - the dishwasher failed!

Feb 21, 2013 10:13 PM #4
Rainmaker
748,296
Rob D. Shepherd
Windermere/lane county - Florence, OR
Principal Broker GRI, SRES

I don't recommend them to my clients. I have seen too many cases where the home warranty company "weaseled out".

Feb 21, 2013 10:14 PM #5
Rainer
388,916
Edward Gilmartin
CRE - Boston, MA

Someone is making money so I would avoid the home warranty.

Feb 21, 2013 10:28 PM #6
Rainmaker
476,098
Christine Pappas - REALTOR®
eXp Realty - Willoughby, OH
eXp Realty - Because Experience Matters

I do recommend them, but I remind them that it is an insurance company and insurance companies seem to like to find reasons to Not cover something.  

Feb 21, 2013 10:45 PM #7
Ambassador
1,299,302
Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

I recommend them now if there are some very old appliances, or oil burners in the home - certainly a cheap insurance!

Feb 22, 2013 01:39 AM #8
Ambassador
2,747,077
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I put a warranty on every resale.  I don't profit.  In fact, I pay for the warrenty.

Good risk reduction.

Feb 22, 2013 02:34 AM #9
Ambassador
768,133
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Dan and Amy, the buyer has to give some thought to the home warranty plan.  So many times, at least around here, the buyers or their agents just choose the basic plan or one step up from the basic.  When in fact, the buyer's agent should have the buyer review all of the plans offered and then let the buyer select the plan (including upgraded plans) which cover items of most important to the buyer.  As it stands, the selection of home warranties is pretty much on auto-pilot.

Personally, I have used a home warranty before that actually covered parts and labor (I believe it was a gas/plumbing problem).

Feb 22, 2013 03:07 AM #10
Ambassador
2,771,865
Liz and Bill Spear
RE/MAX Elite 513.520.5305 www.LizTour.com - Mason, OH
RE/MAX Elite Warren County OH (Cincinnati/Dayton)

Dan, We have one on our own home and the last few years it's paid for a new frig circuit board ,a new water heater, replaced a fried hot tub board and this year a $550 credit towards a new dishwasher.  It's pretty much paid for itself.  And more often than not, we provide a home warranty for our buyers and sellers at closing rather than a closing gift.  And it definitely avoids the closing day calls if the icemaker starts leaking.  Here's the 1-800 number, thank you very much :)

Feb 22, 2013 05:11 AM #11
Rainmaker
1,173,578
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

I am leaving out of our purchase contracts right now because it is an incredibly competitive market.  I have heard stories about the reluctance of the home warranty companies to fix problems, coming up with some excuse as to why they shouldn't.  So I am torn on this one.

Feb 22, 2013 05:31 AM #12
Rainmaker
301,963
Dan and Amy Schuman
Howard Hanna Real Estate Services - Solon, OH
Luxury Home Specialists

David - Makes sense. As long as the client know about them it's ultimately their choice.

Brenda - I completely understand. The more claims I see from our clients, the more I think they are a good thing.

Eric - Thanks so much for the great comment. I think the quality of the company is critical. We were with one real estate company for 7 years that used a particular warranty company and getting them to pay on a claim was a nightmare. This kind of soured me to the warranties. Now, our preferred warranty company is first class and that has definitely made a difference.

Linda - Isn't it odd how things will break just after closing? Glad she had a warranty.

Rob - I see your point and had that experience in the past. A solid warranty company makes a huge difference.

Edward - It's a slippery slope when the warranty companies gives money back. In the end, as long as I don't profit and my client benefits, I'm ok with it.

Christine - How are you! We have used HSA and they do a great job. I think it's important for clients to understand up front what is and insn't typically covered by the policy so they have realistic expectations.

Dagny - That makes a lot of sense.

Lenn - My manager says the same thing about the risk reduction factor, and he's an attorney. Seems like smart business.

Charita - I agree that the client needs to understand the different policies and upgrade if necessary.

Bliz - Amy just called about getting one for our home. Sounds like it would be a wise investment.

Jane - The more and more I think about it, the quality of warranty company seems to be a big part of the equation here.

Feb 22, 2013 06:07 AM #13
Ambassador
1,174,435
Jerry Newman
Brown Realty, 210-789-4216,www.JeremiahNewman.com - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Hi Dan and Amy, I have had both good and bad experiences with these Home Warranties, but I agree that it gives buyer's a peace of mind after they move into that new home. Charita makes a good point above about not always just going with the basic plan. Purchasing that upgrade makes a big difference of what gets replaced or not replaced.

Feb 22, 2013 12:48 PM #14
Rainmaker
542,908
Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

In PA we are not allowed to take commissions on home warranties.  I am puzzled by the comment above "Someone is making money so I avoid them."  Are you saying they should be free of cost? LOL

I guess it depends on the company. I'm not fond of the company my brokerage uses because of a past experience a client had trying to get paid for a water heater replacement (it was covered but the warranty company was trying to say it wasn't.)  

I certainly wouldn't pay for one myself except maybe on a particulary good sale - the basic plans are $419 and sometimes my entire commission is only $1500....sorry, I'm not able to afford to give up 1/3 of my paycheck for one.  

I am required, by my franchise, to offer them to my clients.  Which I do - but again...I just am not crazy about the company we use. 

Feb 22, 2013 09:33 PM #15
Ambassador
1,471,250
Toni Weidman
Sailwinds Realty - Trinity, FL
20+ Years Selling Homes in New Port Richey, FL

If it makes the person feel more comfortable about the process, then it is good. It's all about comfort level. suggested.

Feb 25, 2013 05:48 AM #16
Rainmaker
861,225
Gabrielle Kamahele Rhind
KGC Properties LLC, Tucson Property Management & Real Estate - Tucson, AZ
Broker/Owner

GOOD MORNING DAN!  I have gone back and forth on this topic as well - nicely presented and good things for a home owner to consider!

Mar 03, 2013 06:38 PM #17
Rainmaker
848,657
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Dan and Amy, in the end it is a gamble. We prefer to self insure.

Mar 03, 2013 07:00 PM #18
Ambassador
3,159,039
Paul S. Henderson, REALTOR®, CRS
Fathom Realty Washington - Tacoma, WA
South Puget Sound Washington Agent/Broker!

I use to provide home warranties with all my sales. I used to be a big fan of home warranties until such time as they started charging huge deductibles. Factor this in with a large upfront cost and coverage problems, I have second thoughts...

Mar 04, 2013 01:39 AM #19
Rainmaker
301,963
Dan and Amy Schuman
Howard Hanna Real Estate Services - Solon, OH
Luxury Home Specialists

Jerry - Learning about all the upgrades makes sense. Some of them are well worth it.

Karen - Seems to be the consensus here. The company makes all the difference.

Toni - I agree. Peace of mind is an important thing.

Gab - Always good to see you here. I guess we should present the warranty as an option and let them decide if it's imporant to them.

Bob - Fair enough.

Paul - I'm beginning to appreicate the company we use more and more.

Mar 06, 2013 04:06 AM #20
Rainmaker
2,441,010
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

We use old republic and it is the salesperson IMHO that makes the difference. He goes to bat when we have issues and if our sellers don't offerit we will usually buy it

Mar 08, 2013 07:05 AM #21
Ambassador
1,885,137
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

I think it is good protection for the risk, HOWEVER I have had some buyers when they move in say with some companies the claims process is a real hassle, so it probably depends on the company you select.

Jun 04, 2013 10:27 AM #22
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
301,963

Dan and Amy Schuman

Luxury Home Specialists
Ask Us A Question
*
*
*
*
Spam prevention

Additional Information