Home Warranty Benefits
Owning your own home: It’s always been considered an essential part of the American dream. That’s because with home ownership comes freedom. No longer are you paying for the privilege to occupy someone else’s property; instead, you’re the master of your domain. And independence isn’t the only advantage. Feel like switching out a ceiling fan or knocking down a wall? It’s your property, so go right ahead. And that’s to say nothing of the improved privacy that comes from not sharing a building with a bunch of other tenants. But perhaps the most attractive aspect of homeownership is the financial advantage — as a homeowner you can deduct a portion of your interest expenses from your federal taxable income, and as the value of your property increases, your equity grows right along with it.
But there’s also a downside: responsibility.
What do you do if your air conditioning cuts out in mid July? What happens if your garage door stops working when you need to get to work? Who do you turn to if your dishwasher won’t drain, or you garbage disposal gets jammed? Renters can often turn to their property managers to deal with these kinds of problems. Homeowners, on the other hand, have only themselves. And it’s estimated that the average homeowner ends up spending thousands of dollars on repair and maintenance every year.
This is where a reliable, effective home warranty plan becomes essential.
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In this guide, we’ll walk you through the ins and outs of home warranties — what they cover, what they cost, what advantages they provide, and everything in between.
What Is a Home Warranty?
First, let’s start with the basics: What is a home warranty?
A home warranty is a service contract between a homeowner and a home warranty company. The contract covers repair and replacement costs on major home systems and appliances in the event of breakdowns associated with normal wear and tear. The contract generally lasts for a period of one year.
In other words, a home warranty acts as a homeowner’s safety net. When important components stop working properly or fail outright, the homeowner can simply contact their home warranty company, and the company will take care of the problem. It’s fast, simple, and effective.
But wait, covering repairs and maintenance — isn’t that what homeowners insurance and manufacturer warranties are for?
Not exactly. Although there are some similarities between home warranties, home insurance, and manufacturer warranties, the truth is that each is different, and each provides a unique form of home protection. Let’s take a moment to look at the key differences:
Homeowners insurance
A home insurance policy is designed to cover accidental damage to your property and possessions, as a result of theft, fire, natural disasters, etc. Homeowners insurance is mandatory, meaning that banks won’t issue a mortgage or allow a buyer to close on a home unless he or she can provide proof of coverage. The four main areas of coverage are interior, exterior, personal property, and general liability, but homeowners insurance does not cover issues related to natural wear and tear. That means that if one of your essential home systems or appliances simply stops working, then your policy probably isn’t going to cover it.
Manufacturer warranty
Where homeowners insurance falls short, sometimes manufacturer warranties can pick up the slack. Manufacturer warranties offer maintenance, repair, and replacement services on specific home systems or appliances. The original equipment manufacturer will generally guarantee the use life of their products, and should the product or system fail, the manufacturer will take responsibility to fix or replace the item.
That said, manufacturer warranties do have some fairly serious limitations; these warranties usually only apply to the original purchase made by the original owner. So if you purchase a home and inherit used systems or appliances, and those system or appliances fail, don’t count on the manufacturer warranty to take care of the problem. Also, it’s worth noting that even if you buy a new house, manufacturer warranties seldom remain in effect longer than 12 months from the purchase date. Finally, a manufacturer warranty may cover the cost of the parts, but may not cover the labor involved.
Home warranty
Unlike homeowners insurance, a home warranty is not mandatory when purchasing a home. The main purpose of a home warranty is to offer coverage for the items that homeowners insurance overlooks — key items, appliances, and home systems that inevitably end up needing to be repaired or replaced over time. This is not limited to new items; which items or systems are covered depends upon the specific warranty plan.
How Do Home Warranties Work?
Alright. We’ve established what a home warranty is and what it is not, but how exactly does a home warranty work?
Well, traditionally, the process follows this pattern:
1. When a covered system or appliance fails, the homeowner contacts their home warranty company to request service.
2. The home warranty company contacts a professional repair expert in the homeowner’s local area.
3. The repair expert contacts the homeowner to set up an appointment with the homeowner.
4. The repair expert fixes the problem. If the covered item cannot be fixed, the home warranty company pays for the replacement and installation of a replacement item.
5. A small trade service call fee (agreed upon at the time of sign up) is charged to the homeowner.
6. The home warranty company follows up with the homeowner to ensure that they are satisfied with the service.
Some home warranty companies offer 24-hour assistance, so you can expect to be able to get your issue resolved within a matter of days, or even hours. This becomes especially important when the problem involves vital home systems. After all, you don’t want to have to wait overly long to get a water heater or central heating system fixed in the middle of winter.
Of course, that’s only just scratching the surface. There are a number of reasons to invest in a home warranty beyond just getting a fast resolution to issues with important appliances and home systems. Let’s take a look at some of these advantages.
Benefits of Having a Home Warranty
No one wants to have to empty out their savings account or max out their credit cards just to pay for an unexpected home repair. Having a home warranty adds an extra layer of financial protection — a buffer — so that when vital systems and appliances inevitably break, you won’t have to break the bank to get them fixed. But home warranty benefits go further than that; they protect not only homebuyers and homeowners, but also provide a valuable service for sellers, listing agents, and buyer’s agents as well. Here’s how:
Home warranty benefits for homeowners
At its most basic, an effective home warranty provides peace of mind to homeowners. It helps protect limited budgets from unexpected repair costs, and gives homeowners a convenient and time saving way to locate qualified repair specialists. And, with 24/7 service and no limit to the number of service calls that can be made, the best home warranty plans are always available when you need them. Additionally, new homeowners who may not be as familiar with their home systems or maintenance history can enjoy the reassurance that comes from knowing that, should something fail, the home warranty company will fix the problem. And for those who have just spent a sizable amount of money on closing costs, it’s nice to not have to pay out of pocket for any repairts that might crop up.
1. Home warranty benefits for sellers
When you place a house on the market, it needs to be at its best. As such, when systems or appliances unexpectedly fail, your home’s market value can suffer. Sellers who invest in a home warranty plan during the listing period can ensure that their property is always in good working condition. Likewise, a home warranty helps prevent awkward and potentially costly situations where a sale has to be postponed or canceled due to a failed system or appliance. With the right home warranty plan, sellers can stand behind their properties with confidence, and can expect potential buyers to have the same confidence when the time comes to submit offers.
2. Home warranty benefits for listing agents
Home warranties aren’t just for buyers and sellers; listing agents can also benefit from purchasing a home warranty plan for a seller’s property. After all, the listing agent represents the current owner in the home-sale process, and is responsible for ensuring the best outcome for the seller. By investing in a home warranty, listing agents add an appealing selling point to the home’s listing —
3. Home warranty benefits for buyer’s agents
Buyer’s agents are responsible for guiding home buyers through the complexities of the transaction process, answering any questions or concerns they might have along the way. Unfortunately, there are a lot of potential concerns associated with buying a home. Buyer’s agents can alleviate a lot of those concerns and increase buyer confidence by investing in a home warranty for the purchased property. A home warranty will reassure buyers that, should there be any system or appliance problems with their new home, the issues will be resolved quickly and inexpensively. This also helps avoid the legal minefield of post-sale liability; if something stops working, homeowners contact their home warranty company rather than having to get the sellers involved.
OK, so a home warranty offers some fairly significant benefits for buyers, sellers, and agents on both sides. Next, we’ll take a closer look at some of the expenses associated with home warranties.
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