In a nutshell, home warranty is an annual service contract between a homeowner and a home warranty company. It’s a type of policy that a homeowner pays to cover the cost of repairing home systems and appliances if they break down. Moreover, it can be purchased whether you already own a home or still looking to purchase a home.
While most things you buy come with a warranty, getting a home warranty reassures the homebuyer some peace of mind that they won’t get hit with unforeseen, big-budget expenses soon after moving in. In the same manner, it lessens a seller’s worries against complaints about home defects that arise after the sale closes.
What is a Home Warranty?
A home warranty is not the same as homeowner’s insurance.
Home warranties work in a way that it covers repairs and replacement service to mechanical systems and appliances of your home (e.g. HVAC, plumbing, electrical systems, refrigerators, washers and dryers, dishwasher, pool pumps, etc.).
A homeowner’s insurance, on the other hand, covers major problems (e.g. fire, types of water damage, hail, and property crimes) that could affect affect the entire structure of the house and the homeowner’s personal possessions.
Both are tools that reduce a homeowner’s financial burden, but covers different issues in your home. Although most home warranty companies offer customizable coverage for home appliances and system repairs, it isn’t a replacement for homeowners insurance.
How much do Home Warranties cost?
Home warranties are a fully optional purchase unlike homeowners insurance, which is often required along with the mortgage. The former can cost several hundred dollars a year, which can be paid in installments or up-front. So, needless to say, the cost may vary depending on the type of property and coverage. Basic coverage can range from $200 and goes up to $1000 annually. Generally, you’ll get a year’s warranty included in the sale price for in-built appliances (HVAC unit, water heater, etc.) if you purchase a new home directly from the developer.
Bear in mind that aside from the annual premium, home warranty companies may charge some extra warranty fees. In fact, you still need to pay a ‘service fee’ every time you request that a service provider to examine the problem. Service fees range from $60 to $125 for every contractor’s visit.
Another thing to remember is that not all repairs and replacements are covered by the warranty. So, when purchasing a home warranty, read carefully what’s included in the contract. You’ll surely want a home warranty that covers the systems and appliances you’re concerned about.
What is included in a Home Warranty?
As a general rule of thumb, a home warranty includes repairs and/or replacement to working parts of your home on some, if not all of the following:
- Heating and cooling system
- Plumbing
- Electrical systems
- Roof
- Mold
- Major Appliances (refrigerator, dishwasher, oven, washer/dryer, water heater)
Other companies may offer extended plans, build-your-own coverage, or optional coverage to cover items that are not included under the basic coverage. These items are those that not always common in most households like pool, spa, well pump, or a garage door opening system. Overall, you need to check what is covered and not covered in your plan before signing any contract. Thoroughly check the coverage limits that the company offers and pick the one that suits your home.
How do Home warranties work?
Fore new homeowners, the coverage doesn’t start right away the moment you buy a home warranty policy. Most home warranty companies have a waiting period between 10 – 30 days. They may provide the option to shorten the waiting period for those with home inspection report.
Let’s say your dishwasher suddenly stops working one morning and you’re clueless of what the problem is. Typically, home warranty companies operate similarly. This is how home warranty works if you have a home warranty and a covered system or appliance breaks down.
- You call the home warranty company to report the problem or file a claim.
- The home warranty company will contact the contractor to help.
- You’ll be contacted by the warranty company to schedule an appointment with their contractor or technician.
- The technician will come to your home to assess and fix the problem based on your coverage and what’s approved by your home warranty provider
- You’ll pay the nonrefundable service call fee directly to the contractor, whether or not the warranty company covers the repair cost.
Do you need a home warranty?
A home warranty is supposed to protect a homeowner against expensive, unforeseen repair bills. For a homeowner who doesn’t have extra cash for emergency or sudden expenses, a home warranty can surely act as buffer. Purchasing one can also make sense to homebuyers who have limited information on how and who to contact to fix plumbing, electrical, or appliances.
Who Should Buy a Home Warranty?
One major drawback with home warranty is its limited coverage. And if your house is a new one, you might never use it. In this case, a home warranty might not be necessary with new homes.
Buying a home with intent to sell might make an attractive ground for buying a home warranty. It will definitely save you money on costly repairs if your house is on the older side. Just be sure you know what you’re getting into before purchasing a home warranty policy.
Are you thinking of buying a house with a warranty included in the price? Are you wondering if the warranty is worth it? Look no further! Our trusted professionals at ApexPro can give you some expert advice on how home warranty works and everything else.
Don’t forget to share this guide with friends and family. If you know someone who is considering a home warranty for the next Houston property, share them this guide as well.
About ApexPro Real Estate
ApexPro Real Estate Group is a full-service real estate brokerage specializing in single family and attached residential properties throughout Houston and the surrounding areas. We are a privately-held small business that brings together top agents, cutting-edge technology, and unparalleled service to help clients throughout Houston to buy and sell real estate — and enjoy themselves every step along the way. Our client reviews are exhibits our dedication to help our clients extends beyond the closing table and we would love to earn your business.