Most homeowners are familiar with homeowners insurance, which covers catastrophes like natural disasters or theft, but not everyone is familiar with home warranties, which cover normal wear and tear on common household appliances. Home warranties can be a great investment, especially if you are a new homeowner and you just spent all your cash when you purchased your home.
Home ownership requires a budget for upkeep and maintenance, because while you don’t know which appliance will break—or which plumbing or electrical fixture will suddenly stop working—you can be sure something will need repairing or replacing every year you own your home.
Home warranty specialist Kristy Militello from First American visited Realty World recently and shared excellent information about various home warranty options. She described the home warranty as a service contract with no limits on the number of calls you can make. She showed us that for less than $500 dollars a year (prices vary depending on plan), you could be covered if your refrigerator, oven, water heater, air conditioning, heater, plumbing or electrical systems go out (or all of them).
First American evaluates service people to make sure they are licensed and reputable. First American also buys equipment and replacement parts in bulk and passes those savings on to their customers. Kristy explained that most appliances have a lifespan of about five years, and that many of the appliances are computerized so technicians must have special training and tools to fix things. Gone are the days when a handyman could come in with a wrench and take care of business. Those old chest freezers your parents had in the garage for 30 years just aren’t available anymore (which is probably good, considering how energy inefficient they were).
As appliances become more energy efficient and new regulations require stricter environmental standards, home warranties can be particularly cost effective. For example, it is illegal to fix old refrigerators with ozone depleting refrigerants, so even if an old fridge simply needs a small replacement part, the whole appliance must be replaced. And as of 2016, air conditioners must meet SEER 14 regulations. SEER stands for “Seasonal Energy Efficiency Ratio,” and the Department of Energy will not allow older, less energy efficient air conditioners to be installed anymore. If you have a home warranty, a broken fridge or air conditioner would be covered, so you can get a new one without paying thousands of dollars.
Kristy did mention that while home warranties can save you thousands of dollars, they do require a little patience sometimes. While she referred to First American as the Nordstrom of home warranty companies because of its excellent service, she did admit that your idea of an emergency and the warranty company’s idea of an emergency may differ. For example, when you’re hosting a dinner party for 40 people and your oven goes out, the warranty company will not send a technician over on a Saturday. Kristy shared the importance of filing a claim right away, AND NOT going out and buying a new oven and expecting to get reimbursed for it.
“When we’ve got warehouses full of appliances, it doesn’t make sense to reimburse someone for an appliance they paid full price for at Home Depot,” she said.
When people buy a home, they may not use the home as the previous owners did—and that can cause appliances and systems to break down. Right now, many Baby Boomers are downsizing and their homes are being purchased by families with three or four or five people, putting considerably more strain on toilets, washers and dryers, dishwashers and more. That’s why I recommend home warranties for at least the first year after you move into a new place. Your Realtor can provide more information.
If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.