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Home Warranty Coverage: Pre-Existing Conditions or Not?

Real Estate Agent with Fathom Realty, LLC

The "pre-existing condition" coverage is the most frequently asked about and misunderstood item in a home warranty contract. 

Most home warranty companies now have coverage for "pre-existing" conditions.  What many do not advertise is that for defects/problems to be elligable for "pre-existing" coverage, they must be UNKNOWN to all parties at closing.

What is a "pre-existing" condition? An item that was NOT in proper working condition on the START DATE of the policy, which is the day of closing.

The general rule of thumb is that the item must work properly for your clients after the day of closing.  If they turn something on for the FIRST time and it does NOT work, that is a red flag that the defect could be "pre-existing"...

How will the home warranty company know if it is Pre-Existing?  The home warranty company may ask for the inspection report to see if the inspector had FOUND that defect.  If it DOES show up on the inspection report it is NOT a covered item because it is a KNOWN defect. 

In addition, if the defect can be found by a SIMPLE VISUAL or MECHANICAL test it will not be covered.  A simple mechanical test would be something like simply turning the faucet on and no hot water comes out.  A simple visual test would be something like seeing an actual hole in the pipe under the sink.

If there was no inspection the "SIMPLE" test  will be the deciding factor.

Because every situation is different, they must be evaluated at that time.

Source: Home Warranty of America, , P.O. Box 850, Lincolnshire, IL 60069-0850.

Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

I have often wondered how the warrantee companies decide what was pre-existing.

Jun 07, 2008 04:41 PM
Bart Whitmore
Keller Williams- Louisville - Louisville, KY
Real Estate Agent

Good post, I too have wondered what was the policy of preexisting conditions.

Jun 07, 2008 04:56 PM