Should You Consider a Home Warranty?
Buying a home is one of the greatest decisions you will ever make! It’s an exciting and sometimes scary process. Home ownership is a big step, especially if this is your first time. There are many factors to consider beyond what color to paint the living room or which child gets what bedroom. One of the things you may want to consider is a home warranty. A warranty can protect you from unexpected expenses when a system or appliance breaks down in your home.
What Is a Home Warranty?
First off, we better answer that basic question. A warranty is a service contract in which a company agrees to repair and/or replace systems and appliances that stop working due to natural wear and tear. The warranty company charges an up-front premium for the first year (many times funded by the seller) and then a deductible or “Service Fee” is collected if/when a claim is filed. The company contracts with local vendors at negotiated rates to evaluate and repair the malfunction. All the homeowner needs to do is place the claim.
Now that we know what a warranty does, here are some factors that you may want to consider when asking why or if you need one.
Owning Vs. Renting
There are countless benefits to owning a home instead of renting. However, one of those benefits does NOT include built-in maintenance. If something breaks at your rental, you just call the landlord and they fix it. When you own a home, the cost and responsibility fall to you. A warranty can help defray those costs and keep more money in your pocket.
There Is a Time Trade-off
A home warranty will probably save you money, but it’s important to note that there may be a slight trade-off in time and convenience. The warranty company has a certain timeline they must follow to get the repair done. However, since the local contractor is working at a negotiated (below market value) rate, warranty claims are not always their #1 priority.
The most common example of this situation would be the failure of a central air unit in August in San Antonio. We may have low humidity here, but 100 degrees is still HOT! If your A/C goes out and you file a warranty claim, you could wait 24–48 hours for a repair. If you call a local contractor and are willing to PAY EXTRA, they can usually fit you in right away. The problem comes when you get the bill for the repair. A repair that may have cost less than $100 with a warranty could cost you $1,000 or more without one. You must decide at what point it is worth waiting the extra day or two.
Your Insurance Doesn’t Cover That
Many homeowners make the mistake of thinking that their insurance policy covers things like A/C and water heaters. That is NOT the case. Unless of course, we are talking about lightning or a tree falling on your unit, then you are in luck . . . well, I’m not sure I’d use that term. A homeowners’ policy doesn’t cover “wear and tear” malfunctions. On the flip side of that coin, a warranty doesn’t cover “acts of god,” like lightning or hail. The two products actually complement each other quite well!
How Handy Are You?
If you are like me, it’s amazing I don’t burn my house down changing a light bulb. I am exactly the kind of person that loves warranties! I don’t like to spend money and I lack the skills to fix most things myself. If you are the opposite, then you may not need a warranty. You should still consider the limits of your abilities. If you are skilled in repairing appliance computers and replacing A/C evaporator coils, you may want to start your own business. I’ll be your first customer!
Be Sure It’s Protection You Need
If you are buying a home with brand new systems and appliances, those items are likely covered by the manufacturer for at least a year or more, sometimes up to 10 years on certain parts. In those cases, the warranty will save you on labor costs, but that’s about it. You also want to be sure certain items are covered. Does the home have a water softener, like so many homes in San Antonio? If you have a pool, be sure you know if you need chlorine or saltwater coverage. These are all questions your real estate agent can help you answer, but they are definitely worth asking!
These are just some of the factors you should consider when pondering a home warranty. The bottom line is that a warranty is most likely going to save you money if you have to use it. Just be sure that you understand the limitations and have reasonable expectations on how long repairs might take. It’s just like insurance in that you never WANT to use it, but are thrilled you have it when the time comes!