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Here is a local listing. What is meant by that last line? Thanks.
This 2 bedroom bungalow has a new roof in 2018, new windows, new ductless HVAC system, LVP flooring, new kitchen and bathroom installed 2019. Nicely landscaped fenced in yard, sitting area and grill area. A one year home warranty conveys to the buyer with a satisfactory offer.
Home warranties are just like they sound, if an appliance or water pipe breaks, etc, the warranty covers all or a portion of the repair costs, or possibly, to cover the deductible if it's something regular hazard insurance covers.
Some realtors buy a one-year warranty for the buyer as a type of housewarming gift. They get a discount from the warranty people, who hope to market their "peace of mind" to the warranty recipient on an ongoing basis after the 1 year gift expires.
The home warranty is a nice housewarming gift, but it's also a marketing ploy to sell ongoing home warranty premiums.
It's one of those "home warranty" = service contract doohickeys that aren't worth the paper they're printed on, but sellers get suckered into paying for them by real estate agents who convince them that buyers will be more easily suckered into buying a house if it has one. And as noted above, it gives the "home warranty" salesmen an opening to try to sucker the new owner into re-enlisting once the one year is up by throwing scare stories at them.
It's one of those "home warranty" = service contract doohickeys that aren't worth the paper they're printed on, but sellers get suckered into paying for them by real estate agents who convince them that buyers will be more easily suckered into buying a house if it has one. And as noted above, it gives the "home warranty" salesmen an opening to try to sucker the new owner into re-enlisting once the one year is up by throwing scare stories at them.
I wouldn't characterize all home warranties as being worthless and there certainly isn't any harm in accepting a no-strings-attached free year. If somebody was gifted one they should do their due diligence to research if continuing the warranty after the "free trial" is worth it. Just like anything else.
Most of these warranty places are just sales offices that contract out the actual warranty servicing to various underwriters. It's one of the reasons why it's impossible to find out how much its going to cost on a forward facing website. The rates will be different depending on where the warranty is going to be serviced, the size of the house, type of HVAC system, weather, number of bathrooms, etc.
It's one of those "home warranty" = service contract doohickeys that aren't worth the paper they're printed on, but sellers get suckered into paying for them by real estate agents who convince them that buyers will be more easily suckered into buying a house if it has one. And as noted above, it gives the "home warranty" salesmen an opening to try to sucker the new owner into re-enlisting once the one year is up by throwing scare stories at them.
On the contrary, it gives the seller a $500 solution to a several thousand dollar problem.
If buyers are concerned about the age of the mechanical systems in the house, they will offer many thousand-dollars less, or ask for replacement after inspection indicates the major systems are at the end of their useful life. If you can make them feel better by spending $500 out of the sale proceeds on a home warranty insurance policy, that's money well spent.
And some of those buyers I know, have used this insurance to pay for repairs after purchase. Many won't continue to pay the premium past the first year, but some will.
On the contrary, it gives the seller a $500 solution to a several thousand dollar problem.
If buyers are concerned about the age of the mechanical systems in the house, they will offer many thousand-dollars less, or ask for replacement after inspection indicates the major systems are at the end of their useful life. If you can make them feel better by spending $500 out of the sale proceeds on a home warranty insurance policy, that's money well spent.
And some of those buyers I know, have used this insurance to pay for repairs after purchase. Many won't continue to pay the premium past the first year, but some will.
Maybe, our experience with a home warranty was different. Nine months after we purchased the house our rooftop A/C unit began to make a rumble noise. The home warranty tech they sent told us it was normal for an older unit and other than the inspection, refused to do any repairs. So I went up on the roof to get a look see.
The rumble turned out to be a loose metal access panel and I fixed it myself. I learned later that since our A/C used R22 refrigerant, nobody wanted to work on them anymore because it was so darned expensive, they just replace with something newer. It was a good thing that the problem on our unit was simple and easily repaired. My guess is after the tech saw the R22 label, he decided to steer clear because the warranty company might be stuck with replacing the entire unit.
I doubt that ANY insurance company can stay in business by offering many thousands of dollars of coverage on ancient equipment that has already exceeded its normal lifespan for the small sum of $500 per year. There has to be lots of "catches" that will give the insurance company an "out".
These companies aren't in business just to be benevolent to the general public. They're in business to make money. This means taking in premiums and paying out as little as possible.
Yes, you'll occasionally find someone who makes out well on one of these policies, but they're the exception. Otherwise, the companies wouldn't be in business.
Personally, I wouldn't let any such "policy" sway my offer or purchase price one way or another. In fact, I MIGHT even consider it a deterrent to my purchase because it would indicate that the sellers, who know the property much better than I do, know, or strongly suspect, that something is going to fail soon and are trying to find a cheap way out rather than fix what they suspect/know is going to fail soon.
I doubt that ANY insurance company can stay in business by offering many thousands of dollars of coverage on ancient equipment that has already exceeded its normal lifespan for the small sum of $500 per year. There has to be lots of "catches" that will give the insurance company an "out".
These companies aren't in business just to be benevolent to the general public. They're in business to make money. This means taking in premiums and paying out as little as possible.
Yes, you'll occasionally find someone who makes out well on one of these policies, but they're the exception. Otherwise, the companies wouldn't be in business.
Well, I must be one of those exceptions, because giving me thousands of dollars for an ancient appliance is exactly what a home insurance company did for me shortly after I purchased a house in Las Vegas back when I first retired. I've relayed this story before here in the Real Estate Forum, so I'll just C&P that old post below:
The house we bought in Las Vegas was 21 years old when we purchased it in 2010, with mostly original appliances and HVAC (3 zone). The seller paid for a one-year home warranty for us and during that first year we encountered problems with our combination double wall oven/convection oven/microwave. The main issue was that the lower oven would not heat properly. We contacted the warranty company, they sent out a technician and it was determined that the requisite replacement part was no longer available. The warranty company then gave us the option of replacing the appliance with a unit of their choosing or taking the equivalent in cash. We took the cash and received a check for $2,714. I was completely astonished.
I decided then that I was definitely renewing that policy as necessary through the years. In the following three years (until we sold the house) we used them multiple times to repair our refrigerator, built-in wine cooler, HVAC units, put in a new toilet, garage door opener, and to replace a leaky kitchen faucet. Our annual premium was in the neighborhood of $450, so we definitely got our monies worth out of it.
All in all, we had an overall positive outcome with our home warranty company. YMMV.
Same here. Home warranty on house from 1975 that had been well maintained.
30 year old York furnace started acting up, parts unavailable. Warranty company, after a small deductible, paid for a brand new high efficiency gas furnace. Thank you very much!
Maytag dishwasher had an issue with the soap dispenser not staying closed. Was offered a credit towards a new dishwasher of our choice or repair. Took the credit and bought a Bosch from Home Depot and installed it myself.
Did not renew the coverage when the renewal came up. Needless to say we made money on this.
Well, I must be one of those exceptions, because giving me thousands of dollars for an ancient appliance is exactly what a home insurance company did for me shortly after I purchased a house in Las Vegas back when I first retired. I've relayed this story before here in the Real Estate Forum, so I'll just C&P that old post below:
The house we bought in Las Vegas was 21 years old when we purchased it in 2010, with mostly original appliances and HVAC (3 zone). The seller paid for a one-year home warranty for us and during that first year we encountered problems with our combination double wall oven/convection oven/microwave. The main issue was that the lower oven would not heat properly. We contacted the warranty company, they sent out a technician and it was determined that the requisite replacement part was no longer available. The warranty company then gave us the option of replacing the appliance with a unit of their choosing or taking the equivalent in cash. We took the cash and received a check for $2,714. I was completely astonished.
I decided then that I was definitely renewing that policy as necessary through the years. In the following three years (until we sold the house) we used them multiple times to repair our refrigerator, built-in wine cooler, HVAC units, put in a new toilet, garage door opener, and to replace a leaky kitchen faucet. Our annual premium was in the neighborhood of $450, so we definitely got our monies worth out of it.
All in all, we had an overall positive outcome with our home warranty company. YMMV.
You're the examples that the salesmen always point to.
Do you believe these companies are charitable organizations, or in business to make a profit?
If the latter, I would ask each prospective mark (oops, I mean buyer) - what specific facts would lead you to believe YOU will be the exception to the rule that more will be paid in, in the form of premiums, than will be paid out? If you have such definite knowledge, then go ahead and gamble the (relatively small amount of) money. But if not, then the probability is that you'll be amongst the multitudes that put more in than they take out.
I don't know the statistics of the average input vs. return, but I'd just gently call your attention to the facts that these companies rarely ever seem to go out of business and each year sees more and more of them out there. To some people that might imply that there's gold in them thar "home warranties" - and to some people that might also imply WHERE the gold's coming from.
Just like everyone knows the third cousin who smoked three packs a day since he was 14 and drank like a fish and never ate anything but fried food and Hershey bars and died at 98 murdered by a jealous husband, there are always exceptions and people who get more out of these products than they put in. But I always go back again - follow the money.
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