Question Details

Phillip Kent, Home Seller in Wayne, NJ

Home Warranty...good? bad? or rip off?

Asked by Phillip Kent, Wayne, NJ Sat Aug 30, 2008

I am a seller with an opportunity to purchase a home warranty from AHS, and while it seems like a good thing, I am concerned with all the small print which seems to benefit them at my expense. I do not want to purchase "peace of mind" only to discover at a later date that some small print exception disallows a claim.
Any educated/experienced opinions welcome.

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Answers

16
Phillip,
I agree with many on here about the value of a home warranty. As a seller it helps prevent potential litigation down the road, gives buyer's peace of mind.

Last year, had a buyer who did not want to buy a home warranty and several months after they moved in they turned on the furnace only to find it had a cracked heat exchanger. Ouch! They were wishing they had purchased the warranty at that time.
0 votes Thank Flag Link Thu Aug 4, 2011
I am a homeowner with a warranty from AHS. There are a lot of loopholes and I found I lost more money missing work waiting on the repairman, and multiple attempts to fix an item rather than replace it, than would have been spent if I paid out of pocket. A really thorough home inspection, complete with running any appliances you are purchasing is your best line of defense. A home warranty may reduce the cost of a big purchase, but it in no way, gets it down low. After a few years of paying for the plan, and service calls, you've paid for your typical appliance break downs. I think I would only get it to cover the possibility the HVAC is a real dud the first year of owning the home.
0 votes Thank Flag Link Thu Aug 4, 2011
I always strongly recommend them so I am in. I also make sure the A/C is covered. When buyers are first adjusting to the mortgage payments they do not need a high end expense to slap them in the face. Kind of like a car, you don't expect to get in an accident but they do happen.

However.... that does not mean you (the seller) needs to pay for it. I think it is about 50% right now who pays,buyers or sellers.With that said I guess the question is... are you willing to pay for it or do you feel that is an expense for the buyer to pay for it. I also agree with Rick that is can be used as a negotiating tool. It is usually not a deal breaker in most cases. It really depends on the funds the buyer has available and how much did they have to vary from the price they initially had expected.
Web Reference: http://www.di4homes.com
0 votes Thank Flag Link Tue Dec 8, 2009
Phillip,

I have to weigh in here. First time buyers LOVE the "peace of mind" they offer. If your house is less than $150,000, offer the warranty, but as a negotiating tool. When you counter the initial offer, remove the warranty, but offer to re-include it if they accept your price. This tactic has saved my sellers thousands over the years, as the buyer feels they "won" in the negotiations.

Aside - warranties have their place. They are like health insurance; lots of pre-existing condition exclusions but worth it if you use them one time. My 2 cents.
Web Reference: http://www.HomeGallery.biz
0 votes Thank Flag Link Tue Dec 8, 2009
Hi Phillip,

Broadly, I am not in favor of these or any extended warranties, with rare exception. The chances of you actually being covered is pretty slim. The best thing is a good inspection (and specialized sub inspections where applicable), to identify areas of risk and help you understand where and when you'll be spending money on normal maintenance or anticipated repairs.
0 votes Thank Flag Link Tue Dec 8, 2009
The AHS Home Warranty is the one is sell to my buyers. I have not had any complaints from them. You really need to understand what is covered and what is not. You can purchase additional coverage and have coverage that is personalized to your situation. I always recommend a warranty because of the air conditioning being covered in the basic plan. The replacement cost of an a/c system on an average size home can cost upwards of $3500. The cost of the plan is under $400 so is well worth the cost especially if you purchase an older home. I receive notifications when a repair or replacement is made for one of my buyers and the majority of repairs covered last year were air conditioning repairs and the average amount covered justified the cost of the warranty. To get more information you can visit their website at http://www.ahswarranty.com/ Best of luck to you!
0 votes Thank Flag Link Tue Dec 8, 2009
AHS is the only warranty company I use and recommend. I have them on my own home and have used them twice since I closed escrow in July. Check out my blog ling below - you'll find I endorse them regularly - because I believe they are a great company with a great track record.
0 votes Thank Flag Link Tue Dec 8, 2009
It's a fine and wonderful thing that isn't worth the money. (How about that?!)

Yes, for $75 or whatever, they'll come out and replace the furnace if it dies. Which, it probably won't. Or they'll replace the circuit board on the fridge. (Although, if it's under warranty, they might not). Which means that a $150 repair ended up costing $300.

So, you're essentially buying a $300 tranquilizer. I'm not a fan.
0 votes Thank Flag Link Tue Dec 8, 2009
Trust me. They will kill you with the fine print. I have used them on 4 different occasions. Each time it was not either covered or they used the "unusal wear clause" to deny replacing an appliance or making needed repairs. I am in the process of ending their contract at the expiration date.
Given the cost for service which is now $60.per visit, I might as rolls the dice and take my chances that the product that I purchase will give me good sevice without AHS.
0 votes Thank Flag Link Tue Dec 8, 2009
Phillip

Great Question
It all depends on the type of warranty you get and the cost of the warranty. If you do not get a home inspection then you may need a warranty because you dont know the condition of all the componets of the home. So many people skip getting a home inspection and learn later all the problems that were missed and issues they could of got fixed by the seller before they closed. The small fee for a home inspection is the key to knowing the in and out of the home you are buying.
Florida Certified Home Inspectors
0 votes Thank Flag Link Sun Apr 5, 2009
Hi Phillip,

We recommend to our sellers to accept and advertise the home warranty program but view it as a negotiations tool. Any offer that requires negotiations that takes you below your comfort level the seller has the option of dropping the home warranty program.

We view it as a very positive option for our customers tha allows them to advertise the home as covered by a warranty at potentially no expense to them if the do not get the offer price they desire.
0 votes Thank Flag Link Sun Apr 5, 2009
Be aware that not all is covered. A tine from dishwasher rack broke and fell into motor breaking a part. A technician came out to tell us that the home warranty company doesn't cover broken rack parts so now we are out $100 bucks,(total cost of service visit, $60 deductible not applicable because it's not covered) that could have gone towards the purchase of new dishwasher.

I don't understand how this "product" can be sold as "insurance" / " warranty". As a real estate agent mentioned, I guess I'm the dishonest one trying to "scam" the poor company out of money. Please, give me a break, a business needs to follow through when a product is offered.

Keep in mind, this is just my story so far. I sure hope this isn't how home warranty's do business in general.
0 votes Thank Flag Link Sat Apr 4, 2009
another thought-you can wait until the inspection is completed. If the buyer has some concerns you can provide the warranty at that time. While it doesn't cover everything, it can give the buyer some peace of mind. You may also look for a company that provides the warranty with their listing package on a complimentary basis. Here in Washington State, I work for a local company, John L. Scott. Every seller gets the basic package while the home is listed.
0 votes Thank Flag Link Sat Aug 30, 2008
Phillip
American Home Shield has excellent seller's coverage. For the price per day I don't think you can beat it.
If one thing goes wrong, and with listing times in some areas lasting more than three-six months, I recommend it.

My experience is that the fine print is to protect the company from individuals who try to take advantage of them. The local AHS rep is an important asset. Share your concerns with your Realtor. For honest people, I think if there is a "questionable" issue you will get a fair hearing. Their goal is not to sell you their policy...their goal is to get the policy included when the buyer buys the home.

In my opinion, moving is stressful enough. It is a win-win purchase, and relatively inexpensive.
0 votes Thank Flag Link Sat Aug 30, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
Hello Philip. This is indeed a good question, one that many buyers and sellers probably have asked themselves. There two types of coverages. Buyer's and seller's coverage. Many times, sellers will offer to pay for a home warranty plan as a buyer's incentive and there are different plans available, the basic and more comprehensive plan and a flex plan (not all companies offer the latter version). The premium for the buyer's plan is paid at the close of escrow and it covers the home for 1 year thereafter. Most companies have recently expanded. The most common exception is that they don't cover anything that did not work on the day ownership changed, which means you can't buy a house with a heater that you know does not work and then submit a claim to the home warranty company and have the heater repaired or replaced after the close of escrow. However, if the heater was inspected while in escrow and the inspector did not call it out as not functioning, you have a pretty good chance that the insurance will not question a claim during the policy period. In my personal experience, getting a home warranty for the buyer is worth every penny.

The seller's coverage is a little bit different than the buyer's coverage as the kind of coverage you can purchase is more limited. The seller's coverage is purchased during the listing period, but you don't pay for it unless escrow closes. Thus, if the home never sells, you don't pay for the coverage even if the insurance paid out on a claim. Your agent should be able to put you in contact with the local AHS representative and you can ask all your questions about coverage and exceptions to coverage. You may also want to compare the coverage to that offered by other home warranty companies (First American, Old Republic, Fidelity National, to name just a few of the bigger companies). My last buyers chose First American because they also included pest coverage. I hope this helps you make an informed decision.
0 votes Thank Flag Link Sat Aug 30, 2008
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
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Hi Philip,
Great question. This is what i know about. a home warranty is like an insurance policy, there are covered incidents and not covered. I believe that there is a visit charge for a technician to come to the house but then the repair is free and if needed the replacement is also free. Does it cover major issues like heating, A/C, plumbing, electric , boiler, etc...? In the long run I guess it's mostley a good thing. Also it's a good incentive to transfer to the buyer so that they have a piece of mind for a full year after they move in.
0 votes Thank Flag Link Sat Aug 30, 2008
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