Step 23 to Buying a Home: Is A Home Warranty Right For You?
We need to make one thing clear: a home warranty is not the same thing as homeowner's insurance, nor is it a replacement for homeowner's insurance. Homeowner's insurance covers major perils and catastrophes, such as fires, hail, property crimes, and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions. On the other hand, a home warranty is a separate contract covering repairs and replacements on systems in your home, usually for renewable periods of one year at a time.
What does a home warranty usually cover?
While home warranty policies and coverage may seem similar, each company's policy offerings are unique. In general, a home warranty will cover your home "from the studs in": your home’s systems, such as electrical and plumbing, and your appliances. You may also be able to choose coverage for your pool or hot tub, your septic system, or additional specialty appliances. A home warranty usually does NOT cover exterior issues such as the roof, water intrusion/leaks due to a roof issue, fencing, decking, landscaping, anything in a detached garage or structure, etc.
The cost and coverage of a home warranty can vary widely, so always compare policies before purchasing. If you are interested in a home warranty -- whether the seller is purchasing and providing for you at closing or if you are purchasing it for yourself -- we send you a number of brochures for the major home warranty companies and ask that you review their offerings, their coverage and pricing, and choose the one that is right for you and your new home. In general, warranties usually range between $325 – $700 and are good for one year from the purchase date (and in most cases are renewable each year for as long as you'd like to keep it in place).
It's important to note that, while home warranties cover many of your new home’s crucial systems and appliances, those items must be in working order before the contract is entered into with the warranty company. When you buy a home warranty, consider premium and optional coverage to customize the plan to fit your needs, especially if your home has more than one oven, an ice-maker, a stand-alone freezer, a wine fridge, etc. These extra appliances may not be covered under the standard warranty.
Who pays for the home warranty?
That depends. In most cases, we try to negotiate for the seller to provide a home warranty as part of the original contract negotiations or when we are negotiating following the home inspection as part of the Due Diligence Period. In that case, the home warranty would be provided and paid for by the seller. It's likely you would still get to review the available home warranty options and choose the home warranty company; the seller will just pay for the home warranty out of their proceeds at closing, and you would receive the confirmation of the policy just before closing or at the closing table. If we do not negotiate for a home warranty as part of the contract (for example, we were in multiple offers or if the seller simply doesn't agree to provide one), then you need to decide if you want to purchase one separately. You can still do so at closing, or you can wait until you own the home to take this step. In short, you can purchase a home warranty at any time.
How much does a home warranty cost?
The cost of the home warranty can depend on several factors, such as how old your home is, how big it is, and what you want covered. Usually the cost is between $500 – $1,000. In addition, if something breaks and the home warranty company needs to come out, there is usually a service call fee of approximately $75 - $100 per trip. With most warranty programs, there are no additional fees to repair an item beyond the service fee call. It is important to add, however, that there will be some items and issues that are not covered (which is why it is so important to review those brochures before choosing the right policy for you!); you will still be responsible for paying that service call fee.
What if an appliance can’t be repaired and needs to be replaced?
The home warranty company will almost always try to repair the item first. If that doesn’t work and the appliance needs to be replaced (or if the item is so old or obsolete that it cannot effectively be repaired), they will usually replace the item with a model that has similar features. For instance, if you have a refrigerator that has an ice machine and a water dispenser, the replacement will be one with the same features. However, it most likely won’t be the same brand. For instance, American Home Shield normally replaces all appliances with a GE brand. Therefore, if you have a Subzero fridge, you’re most likely not getting another SubZero. Instead you’ll get a GE fridge with similar features. If you really want a Subzero, most warranty companies will give you the cost of the GE fridge in cash and you can put it towards purchasing the Subzero on your own.
Additionally, the warranty company is, in most cases, required to bring the repaired or replaced item up to code. For example, if your water heater breaks and, when the repairperson comes out, he finds that it cannot be repaired and must be replaced. If your original water heater did not have an expansion tank, but an expansion tank is now code in your area, the new water heater will be installed with the addition of the expansion tank (at no additional cost to you).
Where can I buy a home warranty?
If the seller is not providing you with a home warranty and you want to purchase one for yourself, there are many reputable companies you can choose from (see our list below). You can review their brochures and get a free quote online. This is something you would take care of prior to closing and would ask to have the home warranty start the day of closing.
A few of the companies you might consider are:
When a home warranty is understood and utilized for its intended purposes, it can be the easiest way to save on home repairs and reduce the extra stress that comes with buying or selling a home.
READY TO CHOOSE YOUR HOME WARRANTY? Click here to fill out our online form and notify us of your choice!
Questions? Call us at 404-994-2181 or email us at Maura(at)BuySellLiveAtlanta(dot)com
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