Home warranties are a waste of money, except for one thing…
I’ve said it before, and I’ll say it again. I know I’ll catch flak from some of you who have benefitted from home warranties. But I’m telling you: generally, they are only good for one thing.
Home warranties are only good as an added amenity to sell your home. Period.
Don’t just take my word for it. The great Clark Howard, the Atlanta-based consumer advocate who’s seen on CNN, the web and in both TV and radio syndication, agrees with me. A home warranty may help you sell your home, but as far as protecting your home, its protections are a crap shoot.
“Home warranties aren’t worth the paper they’re written on,” Howard said. “If something goes wrong in your home, the warranty companies are brutally difficult to deal with. They require you to use their contractor only. That contractor may or may not come on schedule while you’re burning up in the heat of summer without AC or freezing in the dead of winter without heat. And then you’ve got a deductible on top of that!”
New home warranties are typically 2/10 warranties. That means solid protection on your major systems for two years, then minimum protection for 3 to 10 years after the date of purchase. On used homes, Howard said the warranties are typically 1-year renewable warranties. They cover heating, air conditioning and major electrical & plumbing systems.
But the warranties are only as good as the contractors, plumbers and electricians your home warranty company uses. Those partnerships are typically contractual, with the subs getting a cut or fee of each repair call. Sometimes, that call’s inconvenient to the subcontractors. They have enough of their own business going on, so yet another warranty call, even though they are under contractual obligation, is a hassle and, quite often, not enough of a money-maker to hurry up and respond to it.
Howard recommended an alternative: set aside $50 a month in a repair fund. Tap into it instead of an annual $400 to $600 home warranty when major things start to fall apart.
Now remember, I said home warranties are good for helping to sell your house. I have personal experience with that. I never carried a home warranty, but when I put my Memphis house up for sale, I added one as a sales incentive to attract buyers. At that time, I had a dual oven. The top oven was no longer working. Instead of shelling out a few hundred dollars to repair it, I added the cost of the home warranty into the sale price of the house. That way, I didn’t have to pay cash out of pocket for a new oven — and my buyer was able to execute the warranty to cover the repair.
And the warranty company’s subcontractor actually showed up…
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