Home Warranties – Good or Bad?

Home Warranties – Good or Bad?  

Are you afraid of buying or selling a home and having major repair issues?  I have clients who have had thousands in repairs taken care of by home warranty companies but they don’t always make sense.  Get a list of state approved companies and learn what is good or bad, especially in a hot real estate market.

Home warranties (aka Residential Service Contracts as the industry calls them) have benefits for both buyers and sellers but while a home warranty may sound like a good thing, there are times you may not need one or requesting one could cost you acceptance of your home offer

It’s Like Ragu, The Home Warranty Is In There

In Texas, the home warranty lobby must have been effective because it’s basically written into our contracts.  “If buyer purchases a residential service contract, seller shall reimburse buyer at closing for the cost …..not to exceed X.” Optional of course but ask yourself, why not request one if someone else is paying for it?

Marketing Your Home For Sale

Home warranties are often used by sellers in marketing their home.  If two homes are similarly priced and one is offering a home warranty, that makes the home more attractive to potential buyers.  You will often see sign riders displaying that the home for sale is covered by a warranty.  Home buyers get the piece of mind and often times the home warranty company will cover the seller’s home for free during the listing period.  Obviously, they are hoping the buyer will go with them and keep renewing.  However, don’t expect the warranty to cover pre-existing conditions so if you water heater leaks now, replace it.

Reduced Liability

A little unknown secret to the general public is real estate firms push their Realtors to tout home warranties for reduced liability. No one wants to buy or sell a home and then have major systems break down and real estate firms don’t want you dragging them into a fight. The two biggest items that can reduce seller and agent liability and give reassurance to buyers are home inspections and home warranties.  Sellers and agents with concerns may be looking to reduce liability by offering a home warranty.  This could because they want you to be reassured and have a marketing point or because they know something has been problematic and is likely to break soon.

What Buyers Should Know

So these residential service contracts sound great, what is bad about them?  They cover a lot of things that don’t often break. Do you need coverage on dishwasher racks or garage door openers?  There is still a call out fee so if you have a simple problem it may make sense to fix it yourself.  You must use the companies designated repairmen vs. being reimbursed for someone you choose.  Home warranty companies hire contractors that offer them the lowest rates and sometimes the contractors may not have been properly vetted.

Horror stories can be found all over the internet but you should really take most with a grain of salt.  These companies cover millions of homes so there are bound to be some unsatisfied customers.  The thing to consider is do you see a pattern of complaints against a company you are considering.

Choosing A Home Warranty Company 

If the seller has offered home warranty coverage, you can still choose any company you like but most people just go with it without further investigation.  The sign may say the home has a home warranty but it will probably be very basic coverage, like for that dishwasher rack.  You should investigate further and considering upgrading the coverage.

Residential Service Contract companies are regulated by TREC (Texas Real Estate Commission) and a list of qualified companies is posted on their website.  You should ask your Realtor, neighbors and friends what their experiences have been and who they recommend.  Some real estate agents don’t like to refer companies but others have close relationships and can get results if you are dissatisfied.

Don’t Have A Rejected Offer!

In a seller’s market, requesting the owner to pay for a home warranty may cause your offer to be rejected.  Don’t lose out in a multiple offer situation by requesting a $500 home warranty when you can buy one yourself or take the hit when the garage door opener breaks.  Home sellers are refusing to pay for all kinds of things that used to be considered normal sales expenses, including home warranties.

Consult with your Realtor about requesting a seller paid home warranty depending on the age, condition of the home and the type of market you are in. It might make sense if it is an older home with major systems like HVAC and water heaters or pool equipment long in the tooth.  However, don’t risk an offer rejection if the home is relatively new or has had recent upgrades to those type of systems.

Contact Keith Laursen when you are buying or selling a Van Alstyne home or any home in the surrounding North Texas areas. There are many things to consider when marketing your home for sale or buying your dream home. Home warranties are just a small part of the overall consideration.



About Keith Laursen

I am a Fathom Realty Realtor specializing in town and country properties in the cities of Van Alstyne, Anna, Melissa, Howe, Gunter, Tom Bean, Whitewright, McKinney and Plano, TX.

My trusty horse and I will help you "spot" the best in real estate. Remember, it can't sell if it's not spotted!
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