September 22, 2015 by Leave a comment

Home warranties cover the cost to repair or replace basic home systems and appliances that come with a house. Buyers of older homes often use them to protect themselves against unforeseen repairs during their first year or two of ownership. Sellers, meanwhile, use them as an incentive to attract buyers, who can take over the warranty along with ownership of the house.

How much do they cost?

Basic warranties average $350 to $500 a year and cover:

  • Kitchen appliances such as your range or oven, dishwasher and built-in microwave
  • Garbage disposals
  • Plumbing including a whirlpool tub
  • Sump pump
  • Water heater
  • Ceiling fans and exhaust fans
  • Heating and electrical system components

Enhanced warranties generally cost an additional $100 to $300 to cover the air conditioning system, refrigerator, washer and dryer, and a garage door remote. You can get optional coverage of items such as a swimming pool or septic system. Items must be in good working order prior to being covered.

Regardless of the type of plan, homeowners typically pay an additional service fee ranging from $50 to $75 for each repair job that is not covered under the annual fee.

What else should I know?

The home warranty company, not the consumer, picks the service company to answer the call.

Also, consumers often expect warranties to cover more than they actually do and misunderstandings create complaints. For example, Angie’s List reports that historically, home warranty service companies have been one of the “worst graded” categories on the list. Members misunderstanding or disagreeing with what their warranties cover and the quality of repair work are cited in the majority of complaints.

In order to minimize misunderstandings, experts stress the importance of reviewing and understanding a service contract before purchasing a home warranty. Consumers should shop around, compare contracts and pay attention to what’s covered and what’s not in the exclusions section.

Are they worth it?

To pay off, homeowners would have to incur one or more significant problems with their basic systems and appliances. For smaller problems, like replacing a microwave, dishwasher, or a refrigerator within a one year period, consumers are better off without a warranty. Or if they have two or fewer electrical, HVAC, or plumbing service calls, they would not need a warranty.

On the other hand, warranties provide peace of mind against serious and unexpected expenses like an HVAC breakdown, the cost of a new burner, or replacing an electrical box. In the end, it really comes down to what you feel is right for you.

scook@reeconadvisors.com'

Steve Cook is managing editor of Real Estate Economy Watch, which was recognized as one of the two best real estate news sites of 2011 by the National Association of Real Estate Editors. Before he co-founded REEW in 2007, he was vice president of public affairs for the National Association of Realtors. In 2006 and 2007, he was named one of the 100 most influential people in real estate.


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