What is a Home Warranty?

You may be asking, “what in the world is home warranty, Jaime?” Another question you may inquire, “what is the difference between home warranty and homeowners insurance?”

The words warranty and insurance both encompass some form of protection for Clients that purchase them. Homeowners Insurance covers damage and loss caused by outside forces such as fire and weather and sometimes vandalism committed by a burglar. If any of these events damage or destroy a portion of your home, insurance would help you rebuild and replace your lost and damaged belongings. Consult with your homeowner insurance agent to ensure you have replacement coverage, etc. There are different levels of homeowners insurance and your agent will be the expert to advise you. 

A home warranty is a service agreement from a home warranty company that covers the cost of repair or replacement of parts of home systems and appliances that breakdown over time. Typically, a home warranty covers single family homes, older homes, condos, townhomes, duplexes, triplexes, fourplexes, new construction and mobile homes that are less than 5,000 living gross area square feet. Home warranties can be purchased on rental homes and second homes as well.

How to Choose a Home Warranty

There are several home warranty companies and your real estate agent can advise you on which one they feel is most reputable. 

When a Client sells their home, typically a buyer asks for their first year of coverage to be paid for at closing. One year warranty ranges from $500-$700 for the first year. Some home warranty companies cover the cost mentioned above, for the first 14 months. There are additional coverages that a Client can purchase for example, roof leak repair, electronics plan protection, well pump, septic system pumping and septic sewage ejector pump, pool/spa equipment, etc. If you are a Client selling your home, your agent is able to order a home warranty for your property as a listing property and you are covered through the duration of the listing agreement or until it sells, then in turn, the home warranty conveys to the new buyer at closing. 

In my opinion, home warranties are phenomenal and I have had a wonderful experience. Such a great experience, I personally, have kept my home warranty on my home for the past eleven years. Quick disclosure, I do not get paid or compensated for including a home warranty purchase in my Clients contract. I am simply speaking from my experience and heart. After your first year of having a home warranty, you may then renew it with the company and pay for your warranty month by month. 

Some clients feel that it is a waste of money and I completely understand. You pay for the home warranty and then you have what I like to refer to as a “copay” when the contractor comes out to your home to repair or replace the part or item. This “copay” is approximately $75. If the contractor could not repair the problem the first time, the “co-pay” is paid and the contractor will come back out to resolve the issue without having to pay another “co-pay”. If the contractor is unable to repair the problem and let’s say a new appliance has to be purchased, the home warranty company does have an allotted amount they are able to replace your appliance (in this instance) and they will give the Client a choice of appliances to choose from. If the appliance is a specialty item, for example a Wolf Luxury Appliance, the company does have a cap amount they will allow for the appliance and apply it to the cost and the Client will be responsible for the remaining amount of the cost. There are some clients that feel their money is best left in a savings account, drawing interest for unforeseen home repairs and costs. Home warranties can be very beneficial for first time home buyers. First time home buyers are not always aware of the maintenance and upkeep of owning a home and sometimes strapped for cash. They just bought their very first home and this is a huge accomplishment and more than likely they had to save quite a bit of money in order to buy their new home in the first place. Home warranties can help them offset some of the costs they incur that very first year that sometimes happens and then keep the warranty month after month, if they wish to do so.

Ultimately, do your homework on home warranties and put pen to pencil and calculate if this is something that would be beneficial to you. Research the different home warranty companies that are out there and that service Texas. This might have been a topic you knew nothing about and I am happy that I was able to educate you on a few of the pros and cons. My revelevent real estate ramble, comes to an end….until next time, happy home buying and selling!!