Home warranties - Do they help?

Some things you might want to know about a home warranty

As we have mentioned before, buying a house is a very expensive proposition. Unless you just happen to be sitting on a pile of cash, you are likely to be paying for it for decades. That being the case, you want to make sure that the property you purchase is well built and is going to last. Furthermore, you want to make sure that there are no major problems with the property, particularly if you are buying an existing home. The last thing you want to do when buying a house is to purchase someone else’s headache.

The major problems are generally avoided by having a home inspection prior to purchase. While some buyers in hot markets have recently been waiving a home inspection in order to encourage the seller to sell to them, this is usually an exception. A thorough inspection should reveal any serious problems with the house, such as electrical problems, plumbing problems or foundation or termite issues. These can be very expensive to repair, and in some cases may not be repairable at all. You want to get these out of the way.

With newer homes and lesser problems, the home warranty has come into vogue as the solution. Buyers or sellers of existing homes can purchase a warranty from a third party for a few hundred dollars that will cover most “moving parts” for a period of a year or so. And many builders of new homes offer a limited warranty to their buyers as well. Are these warranties worthwhile?

Generally, they are. Be aware that the sorts of problems covered by warranties on existing homes are nuts and bolts sorts of things - dishwashers, furnaces, air conditioners and the like. Such a warranty isn’t going to cover a major foundation problem or termites. On the other hand, an air conditioner failure that comes a month after you bought the house is annoying; knowing that someone will come out to repair it at little or no cost to you could be a huge relief.

If you are buying an existing home that comes with a warranty, find out who is servicing the contract. There may be a number of different companies in your area that handle such warranties and some may be better than others. Who actually handles the warranty may be negotiable at the time of sale. If you are buying a new home, make sure that you understand exactly what is and isn’t covered. Of particular concern will be the legalese that is often hidden in the contract. Some builders include clauses that prohibit buyers from suing. Some require that buyers submit to arbitration instead. Arbitration is often described as a cheaper, faster way to handle legal problems, but in practice, arbitration rarely works in the favor of the consumer. 

As always, it is a good idea to have a competent attorney examine any legal documents relating to the sale of real estate. While most real estate agents and lenders will tell you that doing so isn’t necessary, there are many problems that can be avoided by hiring a legal representative to look over your contracts. After all, you are signing documents that will be binding and which may affect you for decades. That being the case, why not spend a few hundred dollars to make sure the documents are in your best interests?