Home Warranties Explained: Pros, Cons, and Everything You Need to Know

When buying a home, one of the considerations you might encounter is whether to invest in a home warranty. In this blog post, we’ll dive into what home warranties are, their benefits, potential drawbacks, and why you might need one.

As a local real estate agent in Portland, Oregon, I often get questions about home warranties. If you have more questions or need specific advice, feel free to reach out. My contact information is below.

What is a Home Warranty?

A home warranty is essentially an additional insurance policy for your home. It provides an extra layer of protection on top of your homeowner’s insurance. Typically, a home warranty covers things like the water heater, HVAC system, and major appliances.

When buying a home, you can ask for a home warranty as part of the deal. Either the buyer or the seller can pay for it, depending on the negotiation. Usually, a home warranty lasts for about a year, but it can be renewed annually.

Cost of Home Warranties

The cost of a home warranty varies, but it usually ranges from $400 to $650 per year. This cost can sometimes be financed by the seller for the first year, and after that, it’s up to you to renew it.

One thing to note is the service fee. When you call for a repair, you’ll pay a fee for the service technician to come out and assess the issue. This fee typically ranges from $80 to $100.

Pros of Home Warranties

  1. Financial Protection: Home warranties cover unforeseen repairs, which can be a lifesaver if you don’t have a lot of cash reserves. For example, if your water heater, which costs about $1,300, breaks down, you might only have to pay a $85 service fee for a replacement.
  2. Convenience: Home warranties provide access to a network of professionals. Instead of searching for a plumber or an electrician, you make one call, and the warranty company handles the rest.

Cons of Home Warranties

  1. Unused Benefits: If you don’t need any repairs, you might feel like you’ve wasted money on the warranty.
  2. Service Fees: You’ll have to pay a service fee each time you request a repair. While common for some services, it can add up over time.
  3. Limited Control: You don’t get to choose the service professional. The warranty company decides who handles the repairs.

When to Consider a Home Warranty

Deciding whether to get a home warranty depends on your risk tolerance and financial situation.

  1. Get a Home Warranty If: You don’t have a lot of cash reserves. A home warranty can help cover significant expenses, giving you peace of mind and financial protection.
  2. Skip the Home Warranty If: You have substantial savings and can handle unexpected repairs out-of-pocket. Also, if you’re buying a new construction home with a builder’s warranty, an additional home warranty might be unnecessary.

Doing Your Due Diligence

It’s essential to do your due diligence when considering a home warranty. Review example plans and understand what each warranty covers. Make sure you know where your homeowner’s insurance overlaps with the home warranty to get the best value for your needs.

Conclusion

Home warranties can provide peace of mind and financial protection for homeowners, especially those without significant cash reserves. However, they may not be necessary for everyone. Ultimately, the decision to get a home warranty depends on your financial situation and risk tolerance.

For more personalized advice, feel free to connect with me on YouTube, Instagram, or Facebook. If you’re looking for more in-depth assistance, you can schedule a free strategy session with me here.

Also, check out my Free Buyer’s Guide to navigate the home buying process with confidence.

Thank you for reading, and I look forward to helping you on your real estate journey!

Don’t Take the Sellers Word Regarding Warranties —

Every time you make a big-ish purchase — like a TV, home appliance, furnace, new windows, roof, sump pump etc,  — you’re offered an extended warranty on the product you have purchased. The extended warranty covers repair beyond the manufacturer’s warranty expiration date, usually by a couple years, but it requires an additional fee.  Most of us turn it down, unless a past experience reminds us that we ‘wish we would have purchased one’ when our dryer died on month 13.

If you’re moving into a house with existing appliances or newer systems, make sure you or your buyers agent looks into the warranties that the seller believes are set in place.  Recently, my buyers were under contract on a home that had a sump pump installed by Terra Firma.  The seller understood her warranty on the system to be 10 years from the time she had it installed, an added ‘perk’ to the sale that “clearly should add value to her home”.  Unfortunately, when I called the company to get the paperwork on the unit and read the entire contract (two pages of small type), the unit was under warranty for ONE year (which is normal).  The seller would have had to have paid an additional $3000 for a 10 year warranty.  Something she opted not to do (but didn’t remember). As such it is important to have the contacts of repair shops where you can approach people to repair your dishwasher, fridge, pumps and everything in between. It is important to be independent in such matters because sellers cannot always be believed.

Had we not caught that fine detail, my clients would have purchased a home with only one month left of coverage on a unit that pumps water from a basement and we were heading into fall rain. There is nothing like feeling like a sucker if something goes on the fritz right after you move in.. Besides, you have plenty of other expenses when buying a new home. The last thing you need is to replace an appliance you thought was in good working condition.

We negotiated a 10 year warranty.

Now I can sleep better.

Check the paper work and warranties that you are offered.  And if there is NO paperwork, then call the companies that did the install.