New home buyers are faced with a myriad of decisions regarding different optional services, from home inspections to home warranty and homeowner’s insurance. It can be a daunting task to decide what is needed, especially when closing costs are mounting. Home warranties have proven to be a particularly misunderstood service. Buyers are unsure if they need one, why they need one, and what a home warranty even covers. I interviewed Chase McRoberts of First American Home Warranty to get a basic overview of home warranties and clarification on some of the frequently asked questions.
First things first, what exactly is a home warranty?
“A home warranty is a renewable service contract offering protection for a home’s major systems and appliances that fail due to normal wear and tear.” Chase explained. Much like a warranty on a car or television, this warranty can offer protection from expensive breakdowns after you’ve moved into your new home. Home warranties also offer protection during the selling process, buffering the seller from costs and delays during the listing period.
Home warranty coverage varies from company to company. Basic plans typically cover kitchen appliances, water heaters, plumbing, electrical, air conditioning and heating systems, ductwork, instant hot water dispensers, whirlpool bath motors and pump assemblies, and a host of other systems within the home. There are some areas that are not typically covered in the basic plan, such as pool or spa equipment, washer and dryer, kitchen refrigerators, well pumps, and more. For these items, there will be additional optional coverage plans. Be sure to talk to your chosen home warranty company for a full list of what’s covered and to be sure you have the correct plan for your home. Don’t be afraid to ask questions. Some potential stumbling blocks include finding out if the warranty covers unknown pre-existing issues and HVAC refrigerant costs.
Deciding whether or not to get a home warranty is one of the many choices that home buyers will have to make when purchasing a new home. In light of all the other additional charges associated with homeownership, this can be a tempting one to pass up on, but buyer beware. A home warranty may cost money upfront, but it will protect a home buyer against expensive home system and appliance failure. For example, if you choose not to purchase a home warranty for your new home and your air conditioning system fails six months after you move in, the complete cost of that repair or replacement will be yours to shoulder. By having a home warranty, buyers will eliminate some of that stress and headache, having an ally to take care of those problems as they arise.
Home warranties are often confused with homeowner’s insurance, but they are different services that offer different protections. The purpose of homeowner’s insurance is to protect against catastrophic and sudden losses, due to natural disasters, burglary, etc. They do not cover normal wear and tear damage that is covered by a home warranty. There is no overlap between these services, so having one does not eliminate the need for the other. Homebuyers should speak to both a home warranty and a homeowner’s insurance company to ensure they have full coverage for their home.
Now that you’ve decided to invest in a home warranty, what can you expect?
As with the coverage options, the cost of a home warranty will vary from company to company, but basic plans in Texas typically start at around $400 and will go up from there, depending on the size of a home and any optional plans the buyer wishes to add on. In most instances in Texas, the first year of home warranty is covered by the seller rather than the buyer. Be sure to speak with your Realtor about the home warranty and who typically pays for it in your market.
As with any service, it’s not enough to just get any home warranty. Rather than shopping around based on price alone, Chase recommends that “the most important thing to look for is membership in the National Home Service Contract Association, which means they adhere to a higher industry code of ethics. Also, they should have a proven track record, including local representation in the marketplace.” Look for a company that has an established tenure in your area, and don’t get caught in by gimmicks offered by new companies. Home warranty companies that have been in business for several years will typically have a wider network of contractors available to provide services should you need them.
A home warranty is a great way to protect yourself and your investment in the long run, offering security and peace of mind as a new homeowner. Be sure to do research, and don’t be afraid to ask questions to ensure you are getting the best home warranty for your needs.