If you’re buying a brand new home – meaning a home that has just been built and has no previous owners – it’s fairly typical to automatically receive a warranty for a set number of years on the structure, its fixtures and appliances – and generally at no extra charge. Builders want to give their buyers peace of mind by guaranteeing the quality of their work and this warranty covers it. Since there’s no additional charge for this kind of warranty, there’s little for home owners to grapple with; yes, they’ll gladly accept the warranty. However, what if you buy a resale home (a home that has had previous owners) and have been given the opportunity to pay into a home warranty? Is it worth it? Do home warranties make sense? Is it yet another scare tactic? Angie’s List., the web source that lets home owners rank, review and find service providers, has kept tabs on consumer feedback on home warranties and the message they got was rather discouraging.
A home warranty is meant to cover appliances and features of your home (like the furnace, air conditioning, etc.) when they stop working properly. Things like roofs and flooring are rarely included. You pay an annual fee (depending on the contract, somewhere between $250 and $700 a year) plus a fee for every service call (usually between $30 and $75) and should the problem fall under the coverage of the warranty, they’ll arrange and pay for a contractor or professional to take care the situation – covering their work and any replacement parts required. It’s not like insurance where you get paid out an amount – this is about fixing and replacing. When you consider that a new furnace can cost as much as $5000 – a bit chunk of change to pay all at once – it’s understandable why people consider home warranties.
Unfortunately, according to Angie’s List Magazine, home warranty providers have received the thumbs down from a great number of their consumer members. Last year, 54% of the reviews on these types of businesses received a D or F grade, which is pretty appalling for an industry average. It’s so bad, in fact, that “home warranties” are the number one worst graded category on Angie’s List.
Consumer dissatisfaction stems from a number of issues:
- “Sneaky” fine print that exclude certain appliances, features or conditions from coverage
- The old “pre-existing condition” trick where companies claim appliances / features had problems to begin with (and if you’re buying an old house, it’s practically a given that things aren’t in “perfect” order)
- Lousy customer service and long waiting periods for an issue to get fixed
- Poorly executed work by the tradespeople hired by the warranty companies (there’s a tendency to give the job to the lowest bidder, which doesn’t always get you quality and experience)
- Expensive fees
To get a better idea of just how these companies have disappointed their customers, read the Angie’s List article and then read the myriad of comments that follow it. Certainly, there are some people who seem happy with their provider, but like the stats suggest, most people have felt cheated by these companies.
So what are you to do?
- Get a thorough home inspection before purchasing a property. A good home inspector can spot a lot of small issues before they become bigger ones and point out the lifespan of certain features of your home.
- A home inspector can’t see through walls, so if there’s a concern about something beneath the surface – like wiring, your HVAC, or plumbing, consider having those inspected separately by professionals in those fields. They can be found through referrals or straight from a service like Angie’s List.
- If things are flagged in your inspections and you are still interested in the home, consider negotiating the cost of repairing or replacing those elements with the current home owner. You might even be able to arrange for the work to be done before you close on the property.
- Get quotes or price out certain costs in your home. If you think the air conditioner will need to be replaced in about five years, roughly how much will that cost? Does it make sense to save for it now in a high interest savings account or would a home warranty cover it for less (if it will cover it at all)?
- Speak with contractors and professionals about whether they work with home warranty providers. If reputable small businesses and tradespeople are staying away from them, maybe you should too. Many businesses can give you their own warranty on a product or labor – so keep that in mind.
- Speak with home warranty companies bluntly about what they will or won’t cover. Speak with people who have experience in dealing with them and ask for their feedback.
Personally, I did not get a home warranty when I bought my home. It’s frankly not something a lot of people do here in Canada anyway, even though many trusted banks will offer a one-year warranty when you qualify for a mortgage. I’d rather put away a bit of money, learn how to maintain my home through smart practices, and should I need to get some work done, choose a contractor I’ve personally researched and can negotiate services with
well i guess i’m one of those statistics that keeps the warranty companies from having a zero satisfaction rating. I have had AHS (American Home Shield) for several years; the first year came with the house and i have maintained it. Only small complaint was that they would not authorize replacing more than 16 inches per repair when i had the polybutylene plumbing problem when obviously the next 4 feet was going to pop soon. I was whistling past the graveyard on that deal anyway; i had to replace it eventually. The list of repairs/replacements is too long to itemize!! The big ticket items; water heater, HVAC, cookstove.
I do fix the little stuff myself of which there is a lot.
I’ll never buy another house built in the ’80’s. Bad plumbing, bad siding, bad foundation/footings, bad sundecks, bad building codes, bad building inspections, bad window sealing, bad floor construction… electrical seems okay, nice trim and doors – all stain grade, solid 6 panel. got lucky, our cabinets are good; not all in the neighborhood are though.
billw
My sister bought a 10-year old home last year and sprung for the 1-year warranty when she closed on it. The inspection was good but they missed the fact that the fridge line was connected straight to the sink supply and did not have its own valve. So you can guess what happened next: they turn the sink on with no fridge attached, water runs into the basement ceiling below for a number of hours, and suddenly a new recessed light/water feature appears in the basement. Massive damage ensues.
They called the warranty company and their question was, “Did you install the water line or did the previous owner?” It was really a trick question because if it was them, then the answer was “not covered” because of a bad install; but if it was the previous owner then it was “not covered” because it was a pre-existing condition. So basically the deal was, “Give us your money and we’ll do nothing.”
In the end it was the new homeowner’s insurance that covered the whole debacle and they handled it very well [StateFarm FTW]. I am sure some people have good experiences with home warranties, or even the car and electronics versions, but I have never met anyone that has used them successfully. I think the best warranty is to learn to fix it yourself or save for a new one.
The thing about home warranties too is it makes you lazy. Well, it made ME lazy. Rather than figuring out the problem on my own, as soon as something stops working, I call the warranters. The worst (as in stupidest) case was when my AC stopped working in my condo. The unit never kicked on (and it was LOUD when it did). $50 and a few days later, turns out someone just tripped over the power cord and it was loose. Shame on me. Other than that, I’ve never needed a service in nearly 12 years of home ownership.
As Jen highlighted in the post, if you do your due diligence up front, you’ll avoid surprises and the need for a warranty. It’s not financially practical but for some, does provide peace of mind. For them, it might be worth it.