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How Important is a Home Warranty?


By Julie Altemus, Super Account Executive and member of CCAR's Affiliate Committee

Given the competitive seller’s market we find ourselves in, home buyers may choose to forgo traditional practices during the home buying process. They may be willing to risk paying over appraisal, opt-out of a home inspection, and not select a home warranty. Owning a home is one of the greatest investments a person can make, and it should be protected by minimizing the risk of paying retail costs associated with breakdowns and repairs.

Let’s meet Joe (a fictitious name of course), who just bought a home. He didn’t ask for a home warranty from the seller so he could potentially beat other competitive offers on the home. It worked! Joe is now a proud homeowner. As part of the negotiations with the seller, Joe agrees to a leaseback for a period of time. To everyone’s utter astonishment, the AC system quits working one week after closing. Yes, you read that right. One week after closing, the AC system stops working and has to be replaced. Remember, Joe didn’t choose a home warranty, therefore his out-of-pocket costs will average $7,000-$10,000 for a full replacement. We aren’t talking small change, are we?

If Joe would have purchased a home warranty, his out-of-pocket costs could have totaled a few hundred dollars, depending on how robust of a home warranty plan he chose. There are variations in home warranty plans and home warranty companies. It’s wise to do a little investigating before choosing a particular company or plan to ensure proper coverage for the appropriate appliances and systems in the home. Not all home warranty companies are alike, just as home insurance companies are not all alike.

For Joe, his best chances of having his AC covered by a home warranty is having an inspection done prior to closing on the home. Home inspection reports are golden in the home warranty process! If a home warranty company asks for the inspection report when a breakdown occurs, this is beneficial to the buyer’s coverage, because it proves that everything worked fine at the time of inspection, or perhaps didn’t. Almost all home warranty companies cover unknown pre-existing conditions, meaning appliances and systems worked fine at the time of inspection, but broke down fairly soon after closing. This was Joe’s case. The AC system worked fine at the time the home was inspected and the inspection report proved it.

Don’t let your clients be a Joe. It’s important to let them know, that even if they don’t get an allowance from the seller, they can purchase a home warranty on their own. Typically, a home warranty can be added for discounted rates within a week or two after closing. Have your clients contact their local home warranty rep and get it set-up--this will minimize their risk and increase their good experience during their first year of home ownership.

As a REALTOR®, you work hard to find your clients a home, and this shouldn’t stop at the closing table. The conversation of attaining a home warranty should be an important part of your business process around the option period. It’s up to the buyers, of course, to decide if a home warranty is right for them.

Too many stories like Joe are beginning to surface in this market. We all are in the real estate industry to help people, and our advice and encouragement can make all the difference in a client's homeownership experience.


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