Home Warranty Plans and How They Work – The Balance

A home warranty can provide peace of mind. The last thing a home buyer wants to worry about after closing is what could possibly break or malfunction in her new home. Since that can cover a multitude of items and systems, for peace of mind, it's a good idea to get a home protection plan. It's especially a good idea to obtain a home warranty if you're a first-time home buyer with no experience maintaining a home.

Now, whether the seller pays for the home protection plan and home warranty coverage or whether the buyer pays for it, will depend on your local customs. It varies. In many locales, it's normal for a seller to pay for the coverage because it's a seller benefit. Why? Because then the buyer won't be calling the seller after closing if something breaks. Many real estate agents will also give buyers a home warranty as a gift at closing.

They are fairly inexpensive, typically ranging from $300 to $500, depending on coverage. Home warranty companies sometimes run special sales and either discount policy prices or offer additional coverage for the same price. The policies are prepaid for a year in advance, at which time they expire and can be renewed by the homeowner at a slightly higher fee.

Although specific plans provide for specific types of coverage, most operate in a similar manner and contain common verbiage.

Because all plans differ, you will want to ask specifically what is covered. Ask your real estate agent if upgrades are available. Pay close attention to whether the home warranty company will pay for repairs to make certain types of systems or appliances compliant with new regulations.

Sometimes a service provider will deny a claim. If that happens or if you are unhappy with the service provided, call your real estate agent and complain. Your real estate agent, if she has a good working relationship with the representative from the home warranty company that is covering your home, well, she can seek resolution for you. Agents all over the country might be very upset at this suggestion, but it works. If my client calls me with a problem, I call my home warranty rep, and she eventually finds a way to work out a solution acceptable to all the parties involved.

In short, don't take "no" for an answer! Call your real estate agent. Your agent might have leverage.

This is the thing that upsets a lot of buyers after closing when they are denied services for a repair. Sometimes it can seem like the company is actively looking for a way not to reimburse the homeowner, and that assumption, at times, can be accurate.

Because the coverage for a home warranty plan can vary from state to state and from policy to policy, ask to see a sample copy of a policy before you commit. You will find some homeowners swear by a home warranty plan and others loathe them.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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Home Warranty Plans and How They Work - The Balance