Are Home Warranties Worth their Price?
August 25, 2020
By April Huynh
Ah -- the famous question that begs an answer! With so many complaints about how ‘they don’t make ‘em like they used to,’ when it comes to the modern-day costly appliances, does it make sense to purchase a home warranty? The answer, as it often is, it depends. Yes, I know, that’s not the easy answer you were probably looking for but, truly much of it really depends on which appliance we’re dealing with and what the issue is when something goes wrong. So let’s delve into that a bit.
What’s Their Purpose
Home warranties are not insurance policies. They are designed to fill the gap that insurance doesn’t cover. The concept is actually sound. Homeowners insurance policies are in place to cover your home and its contents against losses covered by the policy but they are filled with “exceptions” and ‘loopholes.’ One of these is ‘wear and tear’ and, therefore, you cannot make a covered claim because your appliance suddenly broke down. That’s where home warranties come in. And that’s where the proponents of these products will vouch for their value.
There are many different home warranty companies. For the most part, they cover the same things. They are offered by title companies that tweak a few of the benefits to minorly distinguish them apart. I personally don’t have a preference of one over another. I let my clients do the research and let me know which one they want to go with. However, the caveat is that, in a real estate transaction, my buyer never pays for the home warranty unless they want to. If my client is a homeowner and I am managing their property and they have a home warranty already, we’ll use it when we can. If they don’t have one, I typically will not recommend one. Let’s talk about the pros and cons and you will see why:
A home warranty is great for when your dishwasher, washing machine or dryer breaks down as these are not essential life-sustaining appliances. We can live without them, especially for a short period of time. Home warranty companies typically will hire a third party company to come out, assess what the problem is, and fix it. The service call fee is usually between $65-$75. If they can fix it, they will, and replace it, if necessary. There usually is an extra charge on the yearly warranty package for fridge, washer, and dryer coverage, as these are not fixtures, but are considered personal property.
If you have a pool, you can add that to the coverage for a bit more per year, which is nice if your pool equipment breaks down. Here in Vegas, there are lots of pools, and this is probably a good idea if you have one.
Home warranties also cover HVAC, which is great if your AC breaks down in the middle of summer and it’s 1000 degrees outside. Obviously, they tend to break down when it’s the peak of the heat, when they are pushed to work to their limit. The other time I see them breaking down is the first heatwave of the summer, after they’ve been resting for a few months from their last use. The same can be said for the Heating portion of the system. They typically need servicing at the beginning of the heating season or during the coldest stretches.
There are times when you can request to use your own contractor, but that requires pre-approval from the home warranty company and is usually only given if they cannot find someone to fix whatever it is within a reasonable amount of time. If they approve it, they will reimburse you for the repairs that you paid for. They will need the estimate from your contractor and the final invoice.
I may seem like I’m either repeating myself or contradicting myself but honestly, the pros can also mean cons. You can get coverage on your washing machine and dryer, for example, but expect the service call to take some time. That’s the first con -- the time it takes to get the matter handled..
Once you make the claim, the warranty company will put the work order in and within a couple of days, someone will call you to make an appointment to come out and diagnose the issue. If you miss their call, the repair process just got a little longer. Therefore, make sure you answer your phone as the service company is generally quite busy and may move you to the bottom of the stack. If you’re lucky, some of the large companies will make another effort to contact you, but they tend to pass you over if they cannot contact you within a reasonable amount of time, they will move on, leaving you quite frustrated.
Remember too, that just to use your warranty will cost you a service call fee. So you have the money paid for the year, anywhere from $400 to $800 and then typically another $75 when you need to use it, per visit. Some years you will use it, other years, you won’t use it at all. It’s a toss up.
Another con is that if you haven’t purchased the “upgraded package,” i.e., the more expensive one that covers more issues with the HVAC, then you may end up spending a whole lot more than you would if you found someone on your own that fixes air conditioners. In my property management business, we’ve been able to find HVAC guys that have their own business and don’t charge an arm and a leg. This, in my opinion, is where the warranty owner is most frustrated.
Because an HVAC system is an essential item, legally it cannot be down more than 48 hours without someone getting to work on it. As I’ve stated earlier, units tend to break down at certain times in bunches and this causes a delay in which service repairs folks can get to you. Most of the time the repairs are done within three or four days. However, the problem becomes exacerbated after that 3-4 days and there is a dispute between what they determine to be wrong with the unit and whether to repair or replace it. On numerous occasions, those HVAC repair men I referred to in the last paragraph have offered a less costly and quicker solution to my owners.
Since home warranty companies are not bound by the same laws as we property managers have to abide by when it comes to the speed in which these need to be done, and because of that, some property managers have refused to work with a home warranty company. .
Finally, there is the problem with the third party companies that they send out that will just put a bandaid on the problem. They don’t always fix the problem, which means that it’s going to break down again, and you’ll have to pay another service fee. That is, if you still have a home warranty when it does break down again.
While there is a place for home warranties, consider the age of the appliances in the house, especially of the HVAC and plumbing, and then decide if you want a home warranty. In the end, for every occasion in which there is a breakdown, the balance between the time it takes to get the appliance or unit repaired or replaced must always be weighed against its costs.
In my own experience in working with home warranties in property management, it looks like a coin toss. With non-essential appliances, the value they offer can benefit the homeowner and often justifies the cost of the warranty. However, with essential units, I have seen that home warranties are not worth their costs when it comes to the speed and final costs of repair or replacement.