Home Improvement Hub: Home Warranty
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Why You Should Buy a Home Warranty
A home warranty is put in place to protect the homeowner. It is particularly beneficial when selling real estate. A home warranty acts as protection for the seller and insurance for the buyer. When you qualify for a mortgage loan, the lending institution will definitely require a certificate proving there is insurance on your home. However, depending on the insurance broker, sometimes there are exceptions regarding coverage. A new homeowner might soon discover their plumbing, heating or electrical problems aren’t covered under their home insurance. This would be disheartening after just moving into a new home.
A seller’s home warranty is in place to cover problems which occur in a home once the deal has been closed. After buying a home, perhaps draining your bank account to provide a down payment, the last thing you need is problems requiring expensive repairs. Your house insurance is not likely going to pay for troubles with your heating system or problems with your plumbing. These problems, which seemed to come out of nowhere, can be very stressful when settling into a new home. Hopefully the previous owner had bought a seller’s home warranty.
A seller’s home warranty will cover the costs of repairing damages in your new home after you close the deal. The home warranty will pay for failures in items like heating, plumbing, electricity and air conditioning. There is a catch however. A seller’s home warranty will only pay for these repairs if the failure occurs on its own. Coverage can be denied for reasons such as code violations, improper maintenance and unordinary treatment of the affected system.
When shopping for home warranty, it is imperative to carefully read and understand the terms and conditions of the agreement. Once the contract is signed and the home warranty is paid for, it would be difficult to dispute the policy. A home warranty normally provides coverage for one year. When selling a home, it is important to advise the buyer of the renewal date. It would be totally up to the new buyer to renew and continue to pay for the home warranty.
A seller’s home warranty can be included in the closing costs of a mortgage loan. The seller can buy home warranty and defer the payment until closing. Having a seller’s home warranty provides peace of mind. When selling a home, the seller intends to move on without worries concerning the property. A home warranty helps the seller to do just that, knowing they are covered if unforeseen problems arise.
Getting a home warranty is just one part of the whole buying process. Finding a good home loan lender is probably as important as making sure that the house that you are buying is in good shape. The advantage of the internet is that you are able to shop around for good rates for free and get instant access to great Mortgage Quotes instantly. Doing your research will save you time and money!
Is a Home Warranty Plan Right For You?
A home warranty is there to help protect you the seller. The home warranty also offers some insurance to the buyer of the home.
Normally whenever you apply for a mortgage loan, most lenders require that you have proof of insurance on your home. Often times what you think you are covered for, is not included in your policy, and things like electrical problems, heating and mold infestation are not covered. This can be stressful and these kinds of additional expenses will certainly not be welcome.
If you have a seller’s home warranty, once the deal is closed, any problems that may occur in the home will now be covered. So any expensive repair you may have to do, or pipes you have to fix will be taken care of by the warranty. Your home insurance will not likely cover these kinds of problems that will occur from time to time.
Your seller’s home warranty also covers whatever the cost is to repair any damage in the new home, once the deal is done. Things like failures in the electricity, plumbing, air conditioning, and heating will be paid for by the home warranty. Be aware though, that unless these failures occurred on their own, the seller’s home warranty will not pay for the repairs. If you commit a code violation, or are found wanting in terms of how you care for the affected system and any maintenance, you cannot be denied coverage.
If you decide to get a home warranty, be extra vigilant in reading and comprehending the stated terms and conditions on the contract agreement. You will be unable to dispute or challenge the policy once you have signed the contract and made payment. The term of a home warranty is usually one year, so you will have coverage for that period of time. So if you should decide to sell your home, you should let the buyer know when the home warranty will need to be renewed, and leave it up to them to decide whether or not they want to extend it.
In the final closing costs of your mortgage, you may also include your seller’s home warranty. You also have the option of buying home warranty and deferring paying until the deal is closed. Just as you would do, to get a number of home insurance quotes, the same applies when seeking a home warranty. Seek as many quotes as you desire and make your decision accordingly.
Home Warranty – How Does this Service Help Sell Your Home?
What’s the difference between a buyer’s and a seller’s warranty?
Home Seller’s Warranty
Now that the real estate market is cooling somewhat, you’re more likely to find your competitive home sellers offering a seller’s warranty. But what exactly is a seller’s warranty? How can a home warranty help sell your property?
In short, a seller’s warranty provides added assurance that any repairs to major appliances, plumbing, and other home systems will be covered by the seller within a specified time period after the home is purchased, excluding a typical deductible of $35-60. Seller’s warranties are always offered by builders of new homes, but they’re becoming increasingly popular as sales tools for older homes, as well. For the seller, the cost is about $300-400, but it can be well worthwhile, especially if it means a quicker sale of their home.
There are some real estate companies that offer seller’s warranties at no cost to their sellers during the home’s listing period, but most agencies require their sellers to pay for the warranty if it’s something they’d like to offer potential buyers–with the cost often built into the sale price.
Home Buyer’s Warranty
A similar home warranty can be purchased by buyers, as well. The typical $300-400 cost is similar to what a seller would pay for similar coverage, and a buyer’s warranty covers the same things as a seller’s warranty. The main difference is that a buyer’s warranty typically begins on the date of closing and continues for a one-year period after that. Another difference: the buyer’s warranty can be renewed annually.
As is the case with any consumer product or service, it’s always wise to do some research before you decide whether a seller’s or buyer’s warranty is something you want to consider. Then, if you’ve decided that such a warranty is worthwhile in your particular situation, make sure to compare the various programs to see which ones are available in your area, what they specifically cover, their overall cost, the amount of their deductible, anything that might be excluded from the program, and any other variables before you commit. Remember, you can offer the warranty, but if you consider an offer less than full price, you can ask the buyers to provide their own warranty.
Typical Home Warranty’s Standard Coverage Includes:
* Built-in kitchen appliances: Dishwasher, Oven/Range/Cooktop, Microwave, Garbage disposal, Trash compactor, etc.
* Central heater and ductwork
* Plumbing system, water heater, drains
* Electrical system and telephone wiring
* Attic and exhaust fans
* Limited pest control
Extended Coverage Available:
* Limited roof repair
* Central air conditioning
* Washer/Dryer/Kitchen refrigerator
* Well and septic systems
* Pool equipment and/or Spa equipment including Solar
Save Money Buying Your Warranty
Shop online instead of ordering through your agent or escrow company. The major providers offer a discount price for orders placed online. You save the commission paid to a third party who normally arranges the policy. Providing this service adds to your home’s overall appeal to home shoppers. It protects the home buyers against unexpected breakdowns. They won’t have to worry about how much repairs will cost or who to call to fix a broken item. A home warranty gives your home buyers the peace of mind they seek.
Are Alternative Home Warranty Plans A Good Idea?
With the high cost of repairs and the lack of disposable income, home warranty insurance protection plans have become very popular. So are they worth the expense? I have a little personal experience with my own home and a purchased warranty so I thought I’d share my thoughts on the subject.
We purchased our current home a little over a year ago and one of the perks to entice potential buyers was an included third party home warranty purchased by the seller. I have to admit, when buying an older home it sure does ease your concerns about the home falling apart right after you close.
A home warranty plan is simply insurance you can buy against sudden and accidental breakdown. Typical coverage is for the mechanical systems of your home such as electrical, plumbing, furnace, and hot water heater. Our plan included a few extras such as our appliances, central air, pool pump and filter. Our plan would cover the cost of repair or replacement minus a seventy five dollar fee which is paid at the time of repair. Structural repairs such as our roof were not covered. Companies and plans vary so do your homework if you’re considering buying a plan for your home.
Home protection plans are not replacements for home owner’s insurance; it’s just extra peace of mind. Don’t skip having the home you are planning to buy inspected because it includes such a policy. Always hire a licensed professional inspector to look the place over.
So, are they worth the money? In my personal example, even if I had purchased the plan with my own money I would have came out far ahead financially. In fact, we renewed our policy at my expense without hesitation. Shorty after we moved in we lost electricity in two rooms. Our bathtub in the second bathroom started leaking behind the wall. We purchased the home in the winter and in late spring when we opened the pool we discovered the sand filtration system was shot. Those three items combined cost me $225 ($75 x 3 occurrences). Our home warranty plan paid over $3000 for the repairs and a new pool filter.
As you can see, we saved in that situation. I renewed the plan for another year because the alternative would be to use a credit card when something major breaks and that’s not a plan at all. Ideally you would have an emergency fund building interest somewhere but until you have that established a warranty might just be the answer. We even added the washer and dryer to this year’s plan.
Tip: Even though we knew we would renew, we made them work at selling it. We ended up with a free upgrade with a lowered initial repair fee of $40 rather than the $75.
The bottom line is how much risk you’re willing to take. You can save $250 to $500 a year by skipping the home warranty if you’re a gambler. It is a large expense, especially if you believe the risks are low due to the condition of your home. How do I see it? If my 20 year old furnace or my 50 gallon hot water heater goes out, I’m going to be very happy to write that $40 check to have it repaired or replaced. If nothing at all happens I’m still ahead and I didn’t have to worry about it for a year. If my home was newer and everything was under five years old, I’d probably take the $500 and get that emergency fund started.
