Is a Home Warranty a Good Deal?

By Barbara S. Reeves ABR, CRS, e-PRO, RECS and Fine Homes Specialist, Associate Broker

Buyers commonly ask if the home warranty being offered by a seller is a "good deal." Considering that the average furnace repair is between $1,250 and $5,000,* a home warranty may save you dollars on a repair that pops up after the closing. In addition, the money you save by not having to foot the bill for the policy-which on average can cost between $300-$400-makes a warranty a worthy perk.

You should be cognizant, however, of exactly what the home warranty covers. Most sellers only purchase a one-year basic warranty, which will generally cover major built-in appliances and mechanical systems such as heating, electrical and plumbing, and usually it only covers normal wear and tear. For example, if the water heater was not in good working condition when the home was purchased, and it breaks a week or two later, there is no coverage.

If you want more extensive coverage, such as for pool equipment, air conditioning, or even the refrigerator, talk with your real estate professional about negotiating that extra cost with the seller, or consider purchasing your own warranty. Also, remember that although most home warranties provide coverage only for one year, most plans are renewable.

Whether or not you are given the option of selecting your own home warranty provider, here are questions to consider:

• How much is the deductible or per visit cost for repairs?
• Does the plan cover "pre-existing conditions" which weren't known to the seller?
• Who performs the repairs? Can you choose someone or does the company send a technician in their network?
• What's the maximum dollar amount for repairs and what are the policy limitations? For example, will the policy pay for a new water heater at no additional cost?

Whether a warranty is offered by the seller or not, no buyer should forgo a home inspection. An inspection may uncover defects or potential problems that won't be covered by the warranty-and may give you the opportunity to request the seller to make any major repairs before the closing.

But warranties definitely have a place when it comes to protection and peace of mind. Contact your real estate professional for more information on home warranties and providers.

*Based on a nationwide survey of HMS National's (a home warranty provider) independent network of service technicians.