Home warranty equals peace of mind

Buyers, sellers and their respective agents don’t want to worry about things that break or malfunction in the home after the sale closes. A home warranty policy – for specific systems and items – can give peace of mind to those involved. It can also be a seller benefit to help close a sale or a gift at closing to a buyer by the real estate agent.

For more than three decades home warranty companies have provided homeowners and real estate professionals with wide-ranging coverage and service. Before home warranties existed, homes were sold “as is” in California and it was up to the home buyer to make any costly unforeseen future home repairs after the close of escrow.

Some of these items may not have been detectable by a simple visual or mechanical inspection, and may have failed as soon as the new homebuyer moved into their newly-purchased home. Other systems or appliances could fail down the road as a result of normal wear and tear.

In both of these cases, the new homeowner and the real estate professionals involved faced challenges. The homeowner, of course, had to incur the cost of repair; many times the seller of the home and his agent were blamed for not fully disclosing the defects even if they were undetectable. In some cases, this would lead to lawsuits.

Home warranty plans help with these challenges giving homeowners and real estate agents peace of mind. Approximately 90 percent of real estate transactions in California now include a home warranty plan upon the close of escrow

Home warranty plans are a “Go-To” source for these repairs giving the consumer one simple number to call to place claims. The home warranty company then calls a service and repair provider whom they have pre-screened and selected: quality licensed and insured repairmen for all the covered components. The service provider then calls the homeowner to make an appointment to assess and fix the problem.

If an appliance is malfunctioning and cannot be repaired – depending upon the contract coverage – the home warranty company will authorize the replacement and installation of the appliance.

This process saves homeowners time, money and frustration on many different repairs with a small deductible (trade service fee) typically ranging from $50 to $75 per call, with some warranty plans not charging at all if a claim is not covered under their policy. If a covered item cannot be repaired due to parts or age, most companies replace with a model of like kind and features.

Warranty companies offer tailored plans that fit every need and a team of experts with hands-on experience in servicing clients. Warranty companies go out on average two times per year in claims service for every contract they hold. Home warranty plans are typically prepaid for a year and fairly inexpensive, typically ranging from $250 to $500 for a single-family residence under 5000 square feet, depending upon coverage.

Prices reflect coverage as well as a company’s loss history (how often an item breaks down and the cost to repair it).

Coverage may vary from company to company (and sometimes by area and state). Most companies have the same Standard Protection plan, with their main differences in the optional coverage and particularly the upgraded options. Optional and upgraded coverages – and the listed policy limitations — would be the best items to compare apples to apples.

It is important to review and understand the service contract – specifically, what is covered and what is not, as well as service fees – in order to avoid later misunderstandings and disappointment. Some claims may be denied, usually due to improper maintenance, code violations, unusual wear and tear, or improper installation. Policy provisions and the service provider assessment will be the determining factors.

Most policies are annually renewable and many homeowners choose to pay the annual premium to protect against paying a potentially huge replacement cost of a major item. Some examples of items that may be covered by a home warranty plan are: electrical systems, inside plumbing, appliances, heating and air conditioning, water heater, roof, pool and spa, septic pumping, as well as code and permit coverage. Plans are available for larger residences and multi-unit properties.

Unfortunately, home repairs can be expensive and are often unforeseen. Purchasing a home warranty from a trusted source can bring peace of mind to buyers, sellers, investors, property managers and homeowners in general.