7 Considerations Before Buying A Home Warranty

February 6, 2018 by Luis Rojo

Considerations Before Buying A Home Warranty

A home warranty sounds like a great deal. You pay a monthly fee and your repairs and maintenance needs are covered. While that sounds good in theory, it doesn’t work out that way in the real world.

If you’ve never dealt with a home warranty before, here are 7 precautions to consider before signing a contract:

  1. A home warranty is not actually a warranty

Traditionally, a warranty is a “guarantee of the integrity of a product and of the maker’s responsibility for the repair or replacement of defective parts.” For instance, when you purchase a warranty for your new dishwasher or stove and it ends up being defective, the manufacturer will replace it or pay for repairs – no matter what’s broken.

A home warranty doesn’t fit the definition of a warranty. It’s a contract governing the repair or replacement of defective parts in your home; however, it’s limited and subject to strict rules. Not all repairs and problems are covered. In fact, most repairs aren’t covered, and homeowners are frequently denied claims.

Many home warranty companies deny homeowner claims citing the problem as “pre-existing” or claim owner negligence without inspecting the appliance. According to Today.com, “Home warranty companies have been the worst-graded category on Angie’s List for eight years in a row. Nearly half of the member ratings were unfavorable.”

Before sending a home warranty company your money, thoroughly investigate their reputation. If you can’t verify their integrity, tuck money away every month to cover your own repairs. Or, hire a Houston property management company to get your repairs done professionally and on time.

  1. You can’t decide when it’s time to replace your broken heater

Heat is an amenity every landlord is legally obligated to provide their tenant. According to Texas law (Prop Code Ann. 92.056, 92.0561), a lack of heat is considered a violation of the Health and Safety Code. Without heat, your unit is considered unlivable, and the tenant has no further responsibility to pay rent.

If your tenant’s heater breaks and you’re counting on your home warranty company to replace it before your tenant gets mad, be prepared for some blips in the process.

Some home warranty contracts reserve the right to pay you out rather than replace your broken heater. If they pay you out, it will only be a fraction of what a new unit costs. You’ll be on your own to finance the rest of the project.

Meanwhile, your tenant will be without heat for as long as it takes to negotiate with your home warranty company. By the time you look into hiring another company, your tenant might already be planning on leaving or filing a lawsuit. They might even start asking for a refund on their rent.

  1. Home warranty companies make money just like insurance companies

Just like the insurance business, home warranty companies make their money from people who don’t use their services. While not all home warranty companies are unscrupulous, many are. The key is to do your research before signing a contract with any company.

  1. There’s a waiting period

Most home warranty companies won’t let you use your plan for up to three months after signing up. The companies claim the waiting period is designed to prevent people from making a claim for a pre-existing condition. In that case, consider three months of fees to be your loss and their gain. The waiting period is understandable, but paying the fees while you wait is not.

Home warranty companies aren’t the only services with a waiting period. The famed roadside assistance club AAA has a similar policy, although their waiting period is only a few days.

  1. Repairs will take longer to complete

Having to route all repairs through a home warranty company can prolong the resolution and frustrate your tenant. First, you’ll need to file the claim and wait for a response. Once approved, your request will be sent to a third party vendor who will need to review the claim and schedule a service call.

If your tenant has to take time off work to accommodate service calls, they’ll be especially annoyed if the technician can’t complete the job in one session. If the tech needs to order more parts and come back a second time, you can expect an angry tenant.

Hiring a professional property management company like Green Residential avoids the lengthy repair process. We have access to a network of top-rated professionals in Katy, and prioritize requests based on what landlords need. The biggest benefit is your tenant doesn’t need to be home for the repair to take place.

  1. Coverage is more limited than you think

Your home warranty won’t always cover the whole cost of what needs to be repaired. For instance, your air conditioner may not be completely covered. While you can get most broken parts replaced, you’ll likely need to pay for the expensive aspects like recharging it.

  1. A true emergency won’t be prioritized as an emergency

When you call a local 24-hour emergency plumber or electrician, you can expect them to show up at your door within the hour. Others will show up within a few hours. Your home warranty company won’t necessarily be so quick.

Your contract will define a period of time they promise to “respond” by, but that doesn’t mean that’s when a service professional will show up at the door. You still have to coordinate with a third party vendor and your tenant. Depending on what’s wrong, the damage might be greater by the time a technician shows up.

When you hire a property management company offering onsite maintenance 24/7, you won’t be given the runaround and you won’t need to deal with third parties.

When does a home warranty make sense?

When you first buy an investment property, it might make sense to purchase a home warranty plan for at least a year while you assess the condition of the property. After that, you’re better off with an emergency repair fund.

It’s exhausting searching for a home warranty company that doesn’t play games; if you want to skip the roundabout, hiring a property management company is the efficient option.

Green Residential can help 

Proudly serving the Houston and Katy area for years, Green Residential offers landlords the peace of mind and simplicity they crave. Our services are designed to make life easier. We screen tenants, collect rent, and perform hassle-free maintenance and repairs.

Contact us today for a free analysis and find out how we can help manage your Katy home!

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