The Value of a Home Warranty

Ask Phyllis: a blog series of frequently asked real estate questions.

The Value of a Home Warranty

Dear Phyllis,

My godson purchased his first home three months ago. As part of the purchase, he obtained a home warranty. He was doing some major remodeling before he moved in, and when the walls were opened, he discovered numerous issues with the Romex wiring. The contractor working on the home gave him an estimate to replace the wiring. He contacted the home warranty company, and it took four days for them to come out. Because he feared a fire, he already had his contractor start the work. The company won’t reimburse him for any of his contractor’s work. I am asking for your input on the value of a home warranty.

Jenna

Dear Jenna,

A home warranty is a service contract that covers repairing or replacing some home systems and appliances. Unlike homeowners’ insurance, which typically covers damage from external events like natural disasters, a home warranty focuses on the mechanical components of a home. Depending on your policy, these may include heating, ventilation, air conditioning, plumbing, electrical, and major appliances like refrigerators, ovens, and washing machines.

The homeowner can contact the provider when a covered item breaks down or malfunctions. They will arrange for a service technician to assess, repair, or replace the item. It’s important to note that these policies have a lot of coverage limitations and exclusions.

As your godson learned, the home warranty company does not provide reimbursement for work that has already been completed. They have specific contracts with tradespeople and negotiate pricing with them. These policies involve a trade-off between time and money. Dealing with the process, which includes gatekeepers and multiple steps, can be inconvenient, especially in situations requiring an immediate fix, as seen in your godson’s experience.

The value of a home warranty lies in the potential for patience to pay off. They do often prove effective in dealing with repairs over time. This trade-off becomes a crucial consideration for homeowners who must balance the convenience of quick fixes against the potentially smoother resolution these policies offer when time permits.

You didn’t ask but your godson should get his Realtor involved. There is a small possibility that his Realtor can intervene on his behalf. Because of his valid fear of an electrical fire, perhaps the decision will be reversed.