Positive Real Estate Professionals

Many people who are buying homes today are young, first time buyers. Because of the enormous financial responsibility that buyers are taking on, it is important to do a bit of research into the different options that may be available. With the soft sellers’ market that many areas of the country have been experiencing over the past few years many Realtors®, builders, and sellers are offering more incentives to buyers. Keep in mind that there is no one single, monolithic market when it comes to real estate but thousands of local and hyperlocal markets that are as unique as snowflakes. With that said, one of the most common incentives offered to buyers is the home warranty.

Let me make clear that a buyer should not assume anything when it comes to the home buying process; this includes that a home warranty will be included as an incentive or that one is even available for purchase. Ask your Realtor® about the availability and cost of a home warranty. A home warranty is a service contract that is generally offered for purchase to a home buyer and covers the kinds of mechanical breakdowns that regular home insurance doesn’t. Many home warranties do have deductibles that the homeowner is responsible for paying on a per incident basis. The details of these contracts do vary but they generally cover the repair or replacement costs from normal wear and tear of electrical, plumbing, and heating systems as well as many major appliances. It is important to discuss with your Realtor® what is covered and what is excluded by the home warranty service contract; if you are still unsure consult an attorney. The duration of the home warranty coverage can vary so this is another important point to to be clarified. Additionally, many home warranties can be extended on an annual or multi-year basis for a fee so understanding whether your home warranty can be extended is also important.

There are some common complaints associated with some companies that offer home warranties so it is important to check with either your state’s regulatory agency or your state’s Attorney General’s Office (Click HERE for a complete list) for complaints and/or pending litigation. Some common complaints include the exclusion of pre-existing issues (many of which can be discovered by a thorough home inspection), many home warranty companies favor repair over replacement, and many home warranty companies retain control over who does the work. Of course you can always ask your Realtor® about the reputation and practices of various home warranty companies. Many Realtors® have first hand knowledge and experience with the various home warranty companies.

Your Realtor® can advise you on many of the pros and cons of a home warranty. If a home warranty is being offered as an incentive, be sure the premium is being paid in full for the term (length of time) of the agreement and that it is disclosed on the final escrow statement (HUD1). If a home warranty is not being offered as an incentive, it is ultimately the decision of the buyer to determine if the purchase of one is in their best interest.