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
- 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.
- 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
- Unused Benefits: If you don’t need any repairs, you might feel like you’ve wasted money on the warranty.
- 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.
- 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.
- 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.
- 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!