Property Management

Home Warranty Pros and Cons

Craig Acord

Judge for yourself

Owners of real estate whether it’s owner-occupied or a rental property, frequently expect more from these plans than they deliver.

Home warranties aren’t insurance policies. They’re service contracts. Like a service contract that covers repairs to your vehicle, cell phone or your computer, a home warranty is an agreement to pay for fixing and, if necessary, replacing specified home components.

A basic home warranty costs about $350 to $450 a year. A warranty typically covers kitchen appliances, plumbing, water heater, HVAC, whirlpool tub, ceiling fans, and exhaust fans. “Enhanced” plans, purchased for another $100 to $300, provide added coverage for such things as a washer and dryer, refrigerator and garage door opener. Optional items can be added, including pool equipment. I personally had experience with this as my pool pump went out three months after purchasing my home several years ago. I had to be an “SOB” to get it replaced. Took four weeks, was replaced with a pump that was not up to the challenge and I ultimately had to replace a short time later with the right equipment at my expense.

Is a home warranty right for you?

Some buyers of older homes find that a warranty gives them confidence. Other homeowners decide they’re better off setting aside savings to cover home repairs and replacements.

With expensive components near or past their life expectancy, a home warranty might be a good idea. Components that have pre-existing problems, however, typically are excluded from protection.

Pros

Buyers who purchase a previously owned home inherit used appliances and home systems with wear and tear. A home warranty can help cover the cost if things break down.

Cons

Home warranties top the list of complaints received by the Better Business Bureau, State Attorney General’s offices, Real Estate Property Management Companies, and State Insurance Commissions. One reason is the difference between customers’ expectations and what the plans actually deliver. Most complain about the quality of service from warranty companies to include time on the phone, which runs from thirty minutes to two hours waiting for someone to assist you. From an actual point of reference, at our property management company, Pyramis Company, we experience all too often multiple challenges with home warranty companies as we have many clients who have purchased such contracts. Actual experience over the past several years:

  • Average wait time on the phone to get a work order issued runs 45 minutes to 2 hours.
  • Unhappy tenants due to time it takes to get warranty company vendor to property.
  • Poor service from warranty company vendor.
  • Substandard parts.
  • Vendors using a Band-Aid approach to fix the problem.
  • Poor communication with vendor and warranty company.

You will probably have to pay MORE than just your deductible

Make sure you read the fine print of your home warranty contract. Most homeowners don’t realize that they will have to pay for some misc. parts and labor that might not be included in a warranty claim.

You may need to be an “SOB”

Many homeowners and property management companies have to call in the same repair claim multiple times. This is typical with most home warranty companies. Remember, the home warranty company is a for-profit company that will try to perform the “least expensive” repair.

Home warranty companies are out to make a profit

You can’t forget this important point. Home warranty companies will always favor repair or multiple repairs over new replacements. I’ve had many complaints from my property managers of having to deal with unprofessional and non-responsive customer service reps. Customer service reps actually hang up on us and also routinely keep us on hold for thirty minutes to two hours.

Tips

  1. Don’t call at peak times. Unfortunately for a property management firm such as mine, we don’t have that luxury as we have an unhappy tenant needing immediate action.
  2. Document everything. You need to obtain the name and phone extension of every customer service representative that you talk to. You also want to take notes of the conversation, date and time of all calls.
  3. Ask to speak to a manager or supervisor if you feel you are not receiving adequate customer service.
  4. Don’t be abusive or rude even if you are dealing with an uncooperative customer service rep. Always try to be calm and persistent. Never take no for an answer. But, you might eventually have to act like an “SOB” to get satisfaction.
  5. Check into other pro-consumer organizations that might be able to help you resolve your home warranty claim issue.

Bottom line

Home warranty policies can be a blessing, but more times than not they cause lots of pain and suffering especially with tenant occupied properties and property management companies that have to rely on vendors we’re not familiar with and have a good working relationship. Be wary and do your research. Read the fine print in home warranty company contracts.