Understand the pros and cons of having a warranty and if they work for you and your home

When your sink gets a leak, what’s your next move? You might instinctively reach for the phone to get a repairman or look for a replacement. But that repair could be free if you have a home warranty policy. Warranties can cover repairs on certain home elements such as AC units, plumbing, and built-in appliances.

However, in some circumstances, these policies can cost more than they’re worth. Before purchasing or inheriting one with your new home, you should be sure to evaluate your options.

Types of home warranties

Generally speaking, there are two types of home warranties:

  • New homebuilder warranties: When you’re building a new home, the cost of the warranty is included in the price. This guarantee can provide limited coverage on workmanship and materials, such as windows, ventilation and air conditioning (HVAC), plumbing, and similar basics for at least up to the first year. But most warranties for newly-built homes will not cover expenses such as defective household appliances, small cracks in brick or cement, or components covered under a manufacturer’s warranty. Read your policy or service contract before the build begins and pay close attention to the types of coverage and its duration.
  • Warranty for an existing home: Buyers can also choose to purchase home warranty coverage on an existing home, or the home seller or Realtor will pay for a policy. In the latter cases, the warranty is part of the sale of the home. These guarantees usually cover up to one year of repairs for various appliances as well as air conditioning and plumbing issues.

Is a home warranty right for you?

Before buying a warranty, make sure you’re aware of what coverage you may already have. For example, newly-purchased appliances and systems typically come with one-year warranties. And using a credit card to purchase new appliances or even furniture can extend the product’s warranty.

Although the seller of your home may offer you a one-year warranty on the home as an incentive, buyers typically need to pay the premiums after the first year expires. Ask yourself: What is it worth for you? While some purchasers find that a warranty provides security, especially for older homes, others would rather put aside that money to ‘self-insure’ for potential repairs.

What does it cost?

A home warranty generally costs a few hundred dollars per year, either paid up front or in installments, depending on the company and the terms. The cost of the plan will also depend on the type of property (condo, townhome, duplex, or single-family home) and its age.

In addition to the annual premium, home warranties charge a service call fee of approximately $60 each time the buyer requests a service provider to examine the residence, regardless of if something ends up needing a repair. Not all issues are covered by the warranty and even if they are, the company can deny a claim if it judges that the appliance or system hasn’t been properly maintained.

Overall, a home warranty’s value depends on the buyer. If your home has older systems and money is tight for potential repairs, a one might be in your best interest. However, if you have a relatively new home and a decent emergency savings account, you might be better off taking the risk. In some cases, the cost of repairs can be as much as the warranty itself.

Evaluate your home and weigh the pros and cons to decide if it’s your best option. If you do plan on purchasing or accepting a home warranty, be sure to do careful research to ensure a reputable company that will actually pay for repair claims.

And if you need referrals, look to your Realtor. Dante Disabato is not just here to help buy or sell your home, but to be a part of your team throughout ownership. Contact him at 239.537.5351 or through our online form for all of your real estate needs and questions.

This material is based upon information which we consider reliable, but because it has been supplied by third parties, we cannot represent that it is accurate or complete, and it should not be relied upon as such. These offerings are subject to errors, omissions, prior sales, changes, including but not restricted to, price or withdrawal without notice. A buyer should be represented by legal counsel and have a professional inspection and a survey of the property certified to the buyer to verify information contained herein and all other information upon which a buyer may intend to rely. William Raveis Real Estate.