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dev42

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Posts: 1
Reply with quote  #1 

 A question we receive from time-to-time from our Owners, is “Should I Buy a Home Warranty?”

As you probably know, a home warranty is a service contract that is designed to pay for home repairs. So, you pay a home warranty company an annual premium, which could range from a few hundred dollars a year to well over $1,000 per year, depending on options.

How Home Warranty Companies Work

The theory is that, when a repair is needed, you simply call the home warranty company and, voila, the repair is made with minimal expense.

For someone who is on the outside looking in, I can see how home warranties might seem like a great idea. They may think… “No maintenance! What a great deal!"

But, in reality, I think there are many reasons why home warranties do not make sense for investors.

Why Home Warranty Companies Do Not Make Sense

• Deductibles/Service Fees: – All home warranty companies will charge a deductible or service fee for every repair item you initiate. Those fees could range from $75-$100 per call. In some cases, you could call a local repair company and end up paying less than the service fee, depending on the repair.

• Not Everything is Covered: – There is a lot of fine print inside home warranties. And, without question, there are instances where home warranty companies will not cover a repair that you thought should be covered. There are many examples where someone has called a home warranty company, paid the service fee and found that the repair was not covered.

• Control/Response Time: – This is where we, as a property management company, have the biggest complaint. When we call a home warranty company for a repair item, we don’t know who they are going to send. Our Vendors, for example, have all been vetted, they all carry the property insurance and, most importantly, they all offer very fast response times.

In many cases, local Vendors that are used by these large home warranty companies are required to provide deep discounts. As a result, we oftentimes see very slow response times from these Vendors. Obviously, Vendors are going to choose higher margin work in front of the lower margin work. As a result, depending on the repair, your property could be in danger and, at a minimum, your Tenant will become frustrated, which could cause them not to renew their lease.

As you know, vacancies are expensive and a real cash flow killer. It's critical that all maintenance is handled with high efficiency and the right way.

Again, while home warranties may seem like a great option, we generally discourage our Owners from using them for a variety of reasons.

BritneyR

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Posts: 221
Reply with quote  #2 

Buying a home warranty does helps homeowners to keep their property in good shape. People must do a thorough research before buying a warranty or they may just hire a property manager to handle the maintenance issues. 


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LLinVA

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Posts: 160
Reply with quote  #3 
You should not buy a home warranty. You should plan for repairs, have a sinking fund, etc. If there is a business selling home warranties, that means there is profit involved, which means you are paying more for the warranty than it will end up covering. The fact that businesses can exist and make a profit proves you would be better off just planning ahead for things you know will happen sooner or later.
ushomewarranty

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Posts: 2
Reply with quote  #4 
A home warranty really depends on the context of the situation. A home warranty during a real estate transaction gives both parties piece of mind.

For one, the home buyer doesn't have to worry about having their appliances failing for the first year of owning their home. Second, the home seller doesn't have to worry about the home buyer calling them to complain about the old, failing appliances in the home they sold them.

If you are going to get a home warranty, American Home Shield is our favorite.
LLinVA

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Posts: 160
Reply with quote  #5 
No, home warranties are a waste of money. If you can't buy a new dishwasher in the first year of buying a home, you aren't ready to buy a home. A home inspection during the buying process will let you know about anything that looks like its getting to the point of needing replacement. You can then ask the seller to replace it, drop the price by the cost of replacement, find a different home, or accept the risk. 

The seller has no liability after the sale, so some new owner calling isn't an issue, certainly not one worth paying money for.

Warranties like this are just cash cows for the people selling them. Just like extended warranties at Best Buy. 
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