Home Warranties Are More Important in Tough Times

 By Bill Primavera

The Home Guru

Sometimes you just don’t know what you don’t know. But when I find out something new in the real estate busines, I usually I like to hear a compelling endorsement or case history to drive it home. That happened a short while ago when I learned that home warranty programs make good sense, especially in hard times. 

A manager’s meeting was held last week by Donna Riniti, the new manager in my office at Coldwell Banker, devoted to all the paperwork real estate agents have to complete each time we list or sell a home. One of the forms we are asked to bring to the attention of a seller when taking a listing allows the client to either accept or reject a home warranty program.

If you are fuzzy about the difference between a home warranty program and homeowner’s insurance, it’s a pretty clear distinction. While a homeowner’s insurance policy covers damages due to a natural occurrence like the recent Irene, a home warranty program offers a contract that covers the repair or replacement of the most frequently occurring breakdowns of home system components and appliances due to normal wear and tear.

It’s not all that expensive, averaging about $500.00 a year with most companies (at Coldwell Banker, the program is administered by American Home Shield at about that range, depending on the options taken.)  Very honestly, while I thought it was a good enough program, I never felt particularly compelled to promote it to clients.  But at the manager’s meeting, I happened to be sitting near Barbara Bodnar, an associate broker in our office, and her relating her experience with suggesting home warranties made me sit up and listen.

“I would say that 95 percent of my sellers have taken the home warranty insurance, and it’s for a good reason” Barbara said. “Remember, we’re not in the business of selling insurance and we get no compensation if a seller chooses to purchase it. We simply offer it as a service to sellers and it’s totally their choice to accept it.

“With this program, the seller is covered for the home’s systems and appliances during the course of the listing,” she continued, “and, at closing, the buyer is covered for a full year of service.  For the seller, it helps make the listing stand out among others, and for the buyer, it gives a feeling of confidence that the situation will be covered if something goes wrong.

“Of course, there are limitations, and there are some things that are not covered, and that’s why it’s very important to read the contract carefully,” she cautioned. “For instance, there is a service charge each time a supplier comes to fix something, but overall, it can save the homeowner or the buyer lots of money if something does go wrong.”

“Just recently, some issues came up at an inspection just before a closing that had to be addressed,” Barbara said, “and it was a good thing that no money had to be exchanged to get the work done. The buyer was able to call the insurance company after the closing and get the problems taken care of.”

“A home warranty gives the buyer peace of mind and it also demonstrates the seller’s commitment and good will to the buyer,” she said. Barbara also noted that, at the end of the year of coverage for the buyer, the policy can be renewed

Options and coverage can vary by the insurance company. Most would cover major systems like heating, ventilation, air conditioning, plumbing, electricity and appliances like refrigerator, dishwasher, oven, washer and dryer. Other coverage options might be pools, spas, and extra refrigerators, according to the unique needs of the homeowner.

Besides the benefit of avoiding unexpected repair or replacement costs, a warranty company provides a network of independently insured service contractors so that the homeowner doesn’t have to deal with identifying the best supplier for a particular job. The service charge to have a technician visit can vary from $65 to $100 for each service work order.

Especially when budgets are strained, for the buyer, there is a feeling of confidence that there will be no expensive surprises after the purchase of the house.  And for the seller, it offers a marketing point to make the listing more attractive. So, everybody wins.

Such warranties are also available for short sale, foreclosure and auction properties. Homeowners should know that a home warranty policy is not limited only to sellers and buyers in a real estate transaction. Any homeowner can sign on.

An especially important point about home warranties was made by Leila Chapman, vice president of real estate sales for American Home Shield, who said, “A home warranty is budget protection against the unexpected that can help keep owners in their homes.”

To know more about the American Home Shield Protection Plan, visit www.ahswarranties.com or call 1-866-797-4788..

Bill Primavera is a licensed Realtor® (www.PrimaveraHomes.com), affiliated with Coldwell Banker, and a marketing practitioner (www.PrimaveraPR.com). For questions or comments about the housing market, or selling or buying a home, he can be reached directly at 914-522-2076.