Home Warranty Considerations
When considering the purchase of an older home, consideration should be given to the overall condition and age of the structure, roof, heating & cooling systems, plumbing, electrical systems and appliances. Costly repairs or replacement of expensive systems may loom on the horizon and become budget busters.
To help alleviate some of the non-structural concerns many sellers and/or real estate agents will provide a home warranty as part of the sale price for a home. Warranties are offered by a number of companies and typically cover the first 12 months following the closing date and are usually renewable. Annual costs for home warranties vary by company but many range from $350 to $450.
Before going forward with a sales and purchase agreement to purchase a home being offered with a home warranty, be aware of exactly what components the warranty covers, the exclusions and the terms and conditions of the warranty contract. Most non-builder home warranties will come with a deductible for any service call. Deductibles vary by company but most will range from $50 to $85. Some appliances such as washers and dryers, hot tubs and others may be excluded and can be added for an additional annual cost. Obtain a sample copy of the warranty contract and read it. Don’t rely on the company sales brochure or oral representations being made by the owner or real estate agent.
Considerations:
1. Who will provide the actual service? Most home warranty companies sub-contract the repair work to various local service providers but the warranty company will choose what firm will come to your home.
2. Who determines whether a component is repaired or replaced? Generally speaking, the service provider will be working with the warranty company’s guidelines. For low cost items like garbage disposals and other difficult to service items, replacement is typical on the initial service call. For more costly items, repairs will typically be attempted and replacement made only as a last resort.
3. For replacement parts, will new parts be used or are used parts allowed? Many home warranty companies have a contract provision that permits used replacement parts.
4. For replacement systems, will the replacement be made with the same model and manufacturer? Home warranty companies may have a provision to replace with similar capacity components but not the same model or manufacturer.
5. For major component replacement, what is the home warranty process for approval? Most home warranty companies will have a rigorous process prior to approving major component replacement. Depending on the component, the determination may be made the same day or may take much longer. Replacement systems may be provided by the home warranty company and not the service provider causing delays in replacement.
6. Can the home warranty company deny approval for replacement systems? Most home warranty companies will have contract provisions requiring normal homeowner and/or service company maintenance for certain systems. Central air conditioning systems for example, if determined to be dirty due to homeowner negligence may not be covered or the home warranty company may offer to provide a reduced amount to be used against the cost of the replacement. Or the home warranty company may determine that the particular system installed in your home to be undersized for the house and deny coverage beyond a reduced offer to partially cover a replacement.
Once the extent of coverage is understood for the home warranty being offered a more informed decision can be made on next steps. Negotiating the repair or replacement of questionable appliances and/or systems with the seller prior to closing may be advisable. In lieu of repair or replacement, a reduction in offering price to reflect the risk may be prudent. Consider asking the seller or real estate agent to upgrade the home warranty being offered to include more covered appliances/systems and to provide a warranty with a lower per call deductible.
About the Author
Carol Lorenc & Richard Lorenc sell condos and single-family homes for Watson Realty Corp., and live in St. Augustine. The Lorenc’s have lived and worked around the world in Asia, Europe and Latin America and specialize in working with foreign real estate buyers
http://www.homeinstaugustine.com/