What is a "home warranty"

April 19, 2018 1:23 PM

I am buying a house. The agent is trying to get us to buy a "home warranty" for $500. I don't understand what this is or why I need it.

Is this a normal thing to purchase when buying a house, or is this the real estate equivalent of rust proofing?

posted by insoluble uncertainty to Home & Garden (24 answers total)

It provides a limited warranty on some of the basic systems of the house, such has furnace, AC, water heater, etc. What's covered should be very clearly listed in the terms, and for how long it's covered. I bought a home warranty on a previous house and the furnace went belly up within the term, so I was able to get it replaced under warranty with no out-of-pocket expense. It can be a smart move in some circumstances. But if it's never used it seems like a waste of money.
posted by slogger at 1:31 PM on April 19, 2018 [2 favorites]

It's an insurance policy that covers you in case you buy your home and something in it goes wrong or breaks right away - water heater, etc.

a) it's pretty standard; the idea is that you're not on the hook for basic stuff that you don't really know is wrong
b) in my experience, the one thing that went wrong in my house wasn't covered. The furnace stopped working. The design was defective but they claimed it was from lack of maintenance.
posted by vunder at 1:34 PM on April 19, 2018

With a home warranty you often have to use repair people the warranty company designates, and service can be slow. I have never used one myself and probably wouldn't pay for one, unless I had concerns about the major systems of the house I was buying.

That said, I don't think anyone is trying to fleece you. I'm also in the process of buying a house and the sellers are offering one to us as part of the sale.
posted by something something at 1:35 PM on April 19, 2018 [3 favorites]

We had one on our home as part of our purchase agreement. We also carry one now as the property is a rental and we want to ensure we're able to take care of anything big like the furnace needing to be replaced. The companies are very clear about what they do or do not cover. Think of it as useful for replacement of big ticket items like large appliances or HVAC.

That being said, we have tried to use it to address a leak in our roof that was the result of faulty workmanship by the guy who flipped our house and the company bent over backwards to find a loophole to get out of it. You will be required to pay for an assessment by one of their contracted providers for any issue (usually $100-200), which will be applied toward cost if any work is done. If it's not, you are simply out that money. There is also often a wait to get someone out to assess your problem, so it's been no good for things like plumbing leaks that need to be addressed faster.

So, if you have worries about older appliances or HVAC, potentially worth it. For more routine issues and maintenance, not really worth it.
posted by goggie at 1:36 PM on April 19, 2018 [1 favorite]

This was also included as part of the sale when I bought my house (i.e., the seller paid for it), and was presented to us as a fairly standard thing. I assume that whether the seller or buyer pays for it depends on the market and your offers. We never had need to use it.
posted by brainmouse at 1:38 PM on April 19, 2018

My house came with one. When it came time to renew it, I looked at the reviews for it and similar products and came to the conclusion that even the positive reviews showed that you'd spend hours and hours trying to get anything done (and the negative reviews were worse than that) and decided that I'd rather just pay a little more and spend 5 minutes calling a repair person to come out. YMMV.
posted by Candleman at 1:48 PM on April 19, 2018 [1 favorite]

Best answer: Consumer Reports has an overview.

And some general points on insurance: When you buy insurance, the average person pays more than will be returned. That's how the insurance company makes money. So why should you buy insurance?

Two reasons:
1) To insure against a financially devastating event. To insure against a 1 in 1000 risk, it's silly to pay 20 cents for a $100 payout. But it makes sense to pay $2000 for a $2 million payout, because a $2 million cost would ruin you financially. (This is why you should generally buy insurance with a very high limit but also with a high deductible.)

2) If you know that you're a high-risk case. Insurance companies try to screen out these cases, for example by requiring a medical exam for life insurance. They can also do this by excluding high-risk items from the coverage. For example, a home warranty might not cover older appliances.

If you're interested, don't buy the one the agent is pushing before shopping around.
posted by Mr.Know-it-some at 1:49 PM on April 19, 2018 [11 favorites]

We had to use ours in the first four months to replace our HVAC system. I was glad we had it--we technically could have paid out of pocket but would have had to go with the bottom of the barrel option. Instead, we were able to get a high-end system, have the warranty cover the max they were willing to cover (which in our case was about 50%--they are still kind of a rip-off), and we covered the rest. They tried to dispatch one of their crappy vendors (warranty companies are notorious for this, as mentioned above) but I threw a fit and was able to get my preferred contractor approved with a little extra paperwork. No regrets to speak of.
posted by lovableiago at 1:49 PM on April 19, 2018

I would buy it if you think any of the covered appliances seem particularly old/dodgy. Otherwise I'd skip it unless the sellers were throwing it in for free.
posted by craven_morhead at 1:50 PM on April 19, 2018

My folks got one on their house. Yes, you need to use approved service people, and it can be a slow process. But if your appliances and furnace are older, it can be a lifesaver. We got a new HVAC dirt cheap, a new microwave, and we're hoping the 80s-era stove goes soon so we can replace that, too. The 90s-era fridge crapped out recently, but we resuscitated it.
posted by jhope71 at 1:51 PM on April 19, 2018

The sellers should provide the home warranty. It's a selling point. If there's a house you like, and you put in an offer, ask them to buy you a home warranty. If they say no, buy it yourself. At around $500 it's a nice little insurance policy that protects the appliances, and usually the HVAC system(s) for about a year usually. There's a lot they don't cover. But as a new homeowner, a home warranty can be handy when, for example, the dishwasher stops draining, or the sink disposal breaks, or the refrigerator won't stay cold. Warranties almost never will replace items, only repair them.
posted by ImproviseOrDie at 2:13 PM on April 19, 2018 [1 favorite]

I had a generally positive experience with ours, provided by sellers, which covered the first year after we bought the house, but we chose not to renew it. I see it as a nice transition from being in the "renter" mindset (something's broken? call the landlord! magically fixed) to the "homeowner" mindset (if broken, call repair people, get diagnosis and estimates, schedule work, it's fixed). With the home warranty, we called the one-stop warranty phone number, they sent out their certified plumber, who diagnosed the issue (leak in shower pipes) and said it was covered under the plan, and we paid the deductible ($100) to get the wall of the bathroom opened up, some pipes replaced or rebrazed, and the wall redrywalled. A lot like calling the landlord to get something fixed, except with a moderate amount of involvement in the process of having a repair guy come to the house - like 101-coursework practice round for new homeowners.
posted by aimedwander at 2:15 PM on April 19, 2018 [2 favorites]

I had one of these thrown in by my realtor last year. So far its been worse than useless and actually ended up costing me money. The Long and Foster warranty that I was "given" requires me to pay the first $100 for each service call with all other work being covered. This was a whole home warranty too.

When you report an issue the warranty company will contact a service company. The Long and Foster warranty team would contact service companies over an hour drive from my home who would then not show up. Calling back would usually get a service company in a nearby town.

Once a service technician shows up, they would collect the $100 "deductible", spend 10 minutes in my home, tell me they needed a part and would be back to repair. They would then tell Long and Foster Warranty that it was a "maintenance" issue even though I'd just moved in to the house. Long and Foster Warranty would then refuse to have it fixed.

I don't know your realtor, or your warranty company, but Long and Foster, and Long and Foster Warranty suck.
posted by BigVACub at 2:15 PM on April 19, 2018 [1 favorite]

I'm with all the people who are saying if it's not free (or heavily discounted) don't get it. The cost of them ($500) will buy you a low end but perfectly functional new major appliance. Of course, if all your appliances fall apart you are out a lot of money, but a home inspection should tell you that.

Also, with the one we got for free, we still had to throw down $50 for the service call.
posted by The_Vegetables at 2:18 PM on April 19, 2018

You got or should get a home inspection. Seller should be able to specify the age of appliances, furnace, etc., and you should have some idea of the remaining life. A 500 dollar policy is probably 50% profit. It's unlikely to be a good deal.
posted by theora55 at 3:07 PM on April 19, 2018 [1 favorite]

Our sellers provided the warranty and we did actually wind up using it. There was a leak in a bathroom pipe that came through the living room ceiling. The warranty paid for the actual repair (yes, we did have to work with a specific company, but they were accomodating and did good work), but the finish job (plastering) was not included. We paid that ourselves. Since we didn't actually pay for the warranty, it was a win for us. I'm not sure I would have paid for one just cuz.
posted by soren_lorensen at 5:01 PM on April 19, 2018

A contractor built the bulk of our house and made the roof overhang (like half a foot? A foot? I forget) shallower than the design. (In a rainy climate.) It's not covered by the warranty.

(As fuckups go, it's a pretty tolerable one because it doesn't need fixing for the house to be a house, it's just also all I know about this sort of warranty.)
posted by aniola at 5:25 PM on April 19, 2018

We had one with our house and when I tried to get the dishwasher fixed, they refused to send a repair person around. Turns out, no-one wants to fix a $1500 dishwasher on warranty. The insurance company was sued in a class action suit and we got a settlement because apparently they just liked taking money, not fixing things.

In sum, I'm not a fan.
posted by fiercekitten at 5:45 PM on April 19, 2018 [1 favorite]

Best answer: So, a home warranty is most useful as insurance for the *seller*, not necessarily the *buyer*. That's why it's often included free with a home sale. We received a "free" home warranty from the sellers of the houses we've bought, and we included one for the buyers of our last house. I wouldn't willingly buy one for myself - I'll just fix it myself or call my preferred contractors, rather than relying on some random repairperson who is probably the cheapest (read: mediocre or worse) contractor in town. But would I include one for the buyer if we ever sell our home again? Sure.

Any homeowner will tell you things go wrong with houses all the time. The last thing you want when you sell a house for hundreds of thousands of dollars is the buyer coming back to you the next week to challenge the sale when the furnace doesn't fire one cold night or a pipe springs a leak or the refrigerator stops cooling. There are all sorts of nobody-at-fault-it-just-happened malfunctions that can really sour a sale but you can't reasonably prevent.

That's where the home warranty comes in. If you include it, you've given the buyer a free and agreed upon solution to fixing these types of problems for a reasonable amount of time after the sale - so that short of something catastrophic or negligent or misrepresented, the buyer isn't going to have to come back to you to try to get recourse for the things that inevitably malfunction.

IMO, your agent should be trying to get you a free home warranty from the sellers to close the sale, not try to get you to buy one.
posted by eschatfische at 6:57 PM on April 19, 2018 [8 favorites]

Wish I'd known -- I was encouraged to buy my own (for ~$350) when I bought my house a few years ago. Never needed it but used it for a heater service call just before the warranty expired, and got a new thermostat out of the deal. Didn't renew the following year, to the bewilderment of the increasingly aggressive agent, who finally gave up. Haven't needed it since.
posted by Rash at 9:11 PM on April 19, 2018

We got one of these included when we bought our house. We did have to use it to replace the water heater, and because the plumber had to bring it up to code (not covered under the warranty!) it ended up costing us the same out of pocket as it would have if we would have just bought a water heater and installed it ourselves. I could see how for something more major, it would have been helpful but it wasn't worth it in our case and we didn't renew.
posted by LizBoBiz at 2:35 AM on April 20, 2018

I bought a home with an included home warranty. An appliance failed in week one, my claim was denied because “the previous owners had misused the appliance.” Another appliance failed 3 months in. This was not covered because the appliance was too old. So I didn’t renew and believe this was a scam. I’m just glad I didn’t pay for it personally.
posted by OrangeVelour at 5:26 AM on April 20, 2018

Perfectly legit thing. Often times the home warranty is included and paid for by the sellers. Now with those things said...I was not too happy with our home warranty for a couple reasons.(We paid for ours) Whenever you have an issue you have to pay a fee when someone comes out. Maybe like $60. But if the problem is not covered...you're out the $60. On top of that, the warranty company gets to decide who they are going to use for the job and I found more often then not the contractors they used were not the greatest and usually had negative reviews online. Many of these contractors work with the warranty company just to get that fee for coming out to see what's wrong. And I also felt that in all cases there was always obstacles and hoops to jump through before the warranty company actually covered you for something that broke. Though we did get a new stove top via the warranty company.

Final thoughts...if the seller is paying for the warranty then absolutely take it...no harm done. But I wouldn't get it if you're paying. I prefer to select my own contractors who I can research and check reviews. And unless something major breaks it's possible not having the warranty wouldn't mean you end up paying more money for fixes. You could actually pay less. When you account for the yearly rate plus the fee you pay each time a contractor is needed...it may not actually work out to your advantage. Now of course if something major breaks and it ends up being covered then you make out pretty well. But these warranties are unfortunately not really set up to make it easy for the coverage holders to get coverage. I'm not saying it's a scam...I've heard of many times where they saved people's butts. But in general I just don't think they're worth it given all the stringent reasons why something might not be covered, the fee you pay when someone comes out, and the fact that you don't get to decide on which contractor they send. Hope this helps.
posted by ljs30 at 1:01 PM on April 20, 2018

Response by poster: Thanks everyone. After reading in your answers that these are often provided by sellers or agents, I went back and read the email and realized that the our agent is in fact paying for it. I would not buy it for myself, but since the agent is going to pay for it, sure, I'll take it!
posted by insoluble uncertainty at 1:06 PM on April 20, 2018