Buyers
First, determine the age of the home. If it is older than 10 years and it's systems &/or appliances (furnace, heat pump, plumbing, water heater, refrigerator, oven, etc.) are original, it is possible they may soon begin to cause problems. Second, compare the cost of a home warranty plus the service call fee (usually under $100.00) to the cost of repairing or replacing those items that are likely to break down. Lastly, compare the cost of a home warranty with the value of the peace of mind a home warranty can provide. It may be worth it to you to know if any of the covered systems need repair or replacement they can be repaired or replaced for the price of a service call fee. Sellers
Normally, when you apply for a mortgage loan, lenders require that you provide proof you have insurance on your home. Often, things you think are covered by your home owners policy are not, like the electrical system, heating/cooling systems, mold, plumbing, etc. If you supplement your home owner's insurance with a home warranty, once the deal is closed, almost any problems that occur will be covered, thus saving you from having to pay for potentially expensive repairs sought by the new owner. You may also be able to include your warranty in the final closing costs. You also may have the option of buying a home warranty and deferring payment until closing. Is A Home Warranty Right For You?
If you decide to invest in a home warranty, be vigilant in understanding the terms and conditions of the contract. You will not be able to dispute or challenge the policy once you have signed the contract and made payment. The term is usually one year, so you will have coverage for that period of time. If you decide to sell your home, let the buyer know when the policy will need to be renewed so they can decide whether to or not to extend the contract. A standard home warranty costs approximately $250.00, (with additional charges for pools, heating/cooling systems, roofs, and well pumps), and typically covers items for 1 year after purchase. Additional years of coverage can be purchased from some companies. If you feel items covered under a home warranty will get extensive use within a year, purchasing coverage may be a good idea. This is can be a great cost savings for rental properties. If you are handy around the house or if you know an inexpensive maintenance person, a home warranty may not be necessary. Each home warranty company is different, so again, be sure to read your contract carefully; as each has limitations, restrictions, and conditions. As with any contract, be sure you understand what you are signing. |