We always recommend a home inspections to our Buyers to find defects in a home prior to close of escrow. But what about those defects of mechanical items in a home that just go bad after close of escrow? The last thing a home buyer wants to worry about after closing is what could possibly break or malfunction in her new home. Since that can cover a multitude of items and systems, it's a good idea to get a home protection plan. It's especially a good idea to obtain a home warranty, if you're a first time home buyers with no experience maintaining a home. Budgeting for the Buyer in the first year is always tough.
Now, most the time we can negotiate the Seller pay for the home protection plan but even if they don't, I highly recommend the Buyer to purchase one of their choice. If the Seller does pay for the coverage it has a real seller benefit too. Why? Because then the Buyer won't be calling the Seller after closing if something breaks. Buyers seem to think the seller knew that system was going to break when in reality, the Seller had no idea! Some programs allow a Sellers Coverage to be also covered during the listing period for free. Some programs do not include A/C repair or charge a small amount for that coverage.
Home Warranties are not cheap any longer. Since the great recession, these costs for premiums have increased as deferred maintenance of foreclosed properties cause huge losses for the home warranty industry. Typically the warranties range from $400 to almost $700 per one year of coverage, depending on coverage. Home warranty companies sometimes run special sales and either discount policy prices or offer additional coverage for the same price. The policies are prepaid for a year in advance, at which time they expire or can be renewed. All of them are now structured very different from each other with different package names, such as Select plan, First upgrade, or value plus.
Although specific plans provide for specific types of coverage, most operate the same way.
Because all plans differ, you will want to ask specifically what is covered. Ask your real estate agent if upgrades are available. Pay close attention to whether the home warranty company will pay for repairs to make certain types of systems or appliances compliant with new regulations. So basic coverage don't cover everything with a particular system. Some cover septic tanks and others don't. Some will just charge a service call on A/C and some change a Freon recovery fee of $90 or so in addition to the service charge. You will need to determine what is important to you!
What If the claim is denied?
Sometimes a service provider will deny a claim. If that happens or if you are unhappy with the service provided, call your real estate agent and complain. Your real estate agent, if he has a good working relationship with the representative from the home warranty company that is covering your home, well, he can seek resolution for you. If my client calls me with a problem, I call my rep, and she eventually finds a way to work out a solution acceptable to all the parties involved. I will help you, but I can't promise a favorable change in the opinion for you.
What Can Cause Denial of Payment?
Because coverages from policy to policy, ask to see a sample copy of a policy before you commit.