Home Warranties 101

It has become common practice for both buyers and sellers to want a home warranty included in the sale of a home. It can be paid for by either because it is negotiable. Why are they popular? Because even with a good home inspection and full seller disclosure, problems can pop up after the buyer moves in. The warranty helps smooth the buyer through these issues during the first year of ownership.

What does a warranty usually cover? Warranties generally cover the mechanical functions of the house, but not the structure. So it covers the water heater, the plumbing, the electricals, etc. It does not cover the structure which is the roof, walls, windows, and foundation. Think of it like this, if it moves or affects temperature, it is probably covered. Most plans do not include the washer, dryer, refrigerator, or air conditioning, but for an additional cost, these items can be added to the policy. You can even add things like swimming pools and hot tubs.

How long do they last? Home warranties begin the day of closing and last for one year. At the end of the year, most warranties will offer the home owner an extension if they wish to purchase it.

Can I chooses the contractor to do the work? No, the warranty company contracts locally with service providers. If you need to make a claim, you call a 1-800 phone number to place a request. The warranty company then contacts their local contractor who will come to your house to do the repair. Each time you call there is a service charge. It runs from about $45 to $75. I suppose this is to keep people from just willy nilly abusing their policy. You aren’t going to call someone to change a light bulb for the cost of a service call, right?

What does it cost? Last week I telephoned 3 well-known providers and got quotes. You can get a quote on-line, but I just think it’s quicker and easier to pick up the phone. The cost will vary from location to location. This quote was for a house in the Portland metro area, but if you live outside of this area, it may be a different cost.

American Home Sheild 888-429-8247
This is the big boy in the game. This was the very first home warranty company I had ever heard of quite a few years ago. I had an American Home Sheild policy when I bought my own home.
The basic plan: $370
Add appliances: $480
I also know that AHS offers an option to cover the house from the moment it is listed for sale. So in other words, if something is found before closing, it can be covered. I recently sold a house in Lake Oswego that had an AHS policy that covered the basic, the appliances, the central air, and was retroactive to the date of listing. The total cost was $510.

Fidelity National Home Warranty 800-862-6837
The basic plan: $260
Basic plus air conditioning: $320
Basic + air + washer/dryer/refrigerator: $425
Fidelity National Home Warranty charges more than this if the house is larger than 5000 square feet. That may be true of the other plans as well. Pretty much the rule of thumb is that you need to call and get a direct quote for each specific property.

First American Home Warranty 800-444-9030
The basic plan: $290
Value plus which includes air conditioning: $420

I honestly think all of these companies are comparable. The pricing is competitive, but please call to get a direct quote. There are so many variables that affect the pricing. I’ve put this up to just give you a sense of costs.

Do these policies get used? Yes. I recall hearing that they get used an average of 2.7 times for each policy.

Let me tell you about my own experience. In the first year of owning my home I had trouble with my dishwasher. It was an older model, so I wasn’t surprised. I called American Home Shield for the repair. The cost of the repairs was going to be about $300. It seemed silly to spend $300 on an old dishwasher. I opted to apply that $300 towards a new dishwasher instead. I also used my policy for a furnace repair.

Be aware that the policy is for repair. As in my example above, it won’t necessarily help you to get all new appliances. Also, read through the policy so that you know what is covered and what is not.

I do recommend home warranties. I think if you have one, you are likely to use it. And that first year in a new home, when you have had all of the expense of the purchase, it makes the first year less stressful.

Let Linda or I know if you have any questions. As always, we are here to help.