Homeowner warranties are they worth it?

Question

New investor, have a duplex under contract. It's built in 1955. Had the inspection today and other than some electrical seems like most appliances and mechanicals are operating fine, but are about 16 years old, is it worth investing in a home owners warranty?

Nathan Gesner · Answer

You'll get different opinions, but most of them will say they are not worth it. Home Warranty programs are designed to make them money, so the odds of you getting your value back are very small. If you qualify for a repair, they will send a low-quality technician to make the minimal repair. In my town, I have one appliance repairman that is set up for warranty repair and he gets paid $35 an hour instead of his usual $65, so warranty repairs are last on his list. Warranty companies are so problematic that most Property Managers will not manage a home with a warranty on it.

Julie Hartman · Answer

@Wendy Busa It was very well put by @Nathan G. but I will just add that you will rarely get your value out of a home warranty. They will try to send a repairman 12 times before ever paying to replace anything. We've managed several properties with warranties and we ended up spending more time and money chasing down repairs and reimbursements than we would have by just calling our trusted repair personnel. Thankfully we don't have any now.

Josue Vargas · Answer

@Wendy Busa In most cases not worth it. Next time you are doing a deal, ask the seller to pay for it, something like $600 max (depending on property value) for home warranty insurance (you pick the company), or ask your Agent/Broker to help you with the cost. Some RE brokerage have discounts with Home Warranty company partners. You don't know the property very well during the first year, a Home Owners warranty during the first term is a reasonable expense I would do for year 1.

Bria Johnson · Answer

@Wendy Busa I use HW for my lease option transactions and my rentals. I can say I have had a decent experience thus far. Of course they come with their kinks but I believe that I save a ton when unexpected repairs come up. Thus far I only had 1 claim denied and it wasn’t by the HW company. I had a few different contracts that refused to do the work because there wasn’t a barcode on the dishwasher. Since it was leaking and causing water Damage, I just went outside of the HW company to get it fixed.The worst part I believe is the wait time if something needs to be fixed or replaced. I think test it out. Paying $100/m and then $100 service fee for a repair or replacement is not so bad to me.

Khoa Ha · Answer

@Wendy BusaThe short answer is no. The reason is when you have issue all they will do is charge you a fee to send someone over to inspect. Then they will find all the reason in the world to deny your claim. During this whole time your appliance is still broken but you can't repair it yourself because you depend on them to do it. I had a cooktop exploded and had to worked with them for over 1 month. After they denied my claim twice and charged me $75 for each time I ended up cancelled the plan. Only got 50% of the premium back after only 2 months into the contract. Lost a month not being able to cook and had to togo the whole month. I no longer recommend any of my clients to buy home warranty. Better to save that month and repair your appliances when it break down.

Nathan Gesner · Answer

Is $75 an hour the going rate for a plumber? I'm paying $90 - $110 in my area, so any plumber willing to take $75 an hour would be taking a drastic pay cut. That's why the technician responding is usually lower quality. I network with hundreds of property managers around the country, many of them managing thousands of units, and they will not manage a property with a home warranty in place because of the delays and quality of work.

Greg M. · Answer

While I agree that these policies are not worth it, I'm not sure that is fair about the quality of the companies. I'm friends with the owner of a plumbing company that works for one of the big warranty companies. The workers are not low-quality. I used them long before becoming friends with the owner. I've spoken at length with him about the warranty program. In our area, each warranty call is a $75 charge of which he gets 100% of that. Depending on the issue or if parts are needed, the warranty company will pay extra. While that is frequently a little less than a direct call to his company, he says that a lot of the repairs that he gets are ridiculous. A dripping faucet that takes a couple minutes to fix, a clogged sink that gets snaked in two minutes, or a toilet that runs that needs 30 seconds to install a new rubber ring on the flapper.

Andrew Frowiss · Answer

@Wendy Busa I agree what Nathan said. I'm a Property Manager and we actually do work with home Warranties if our clients have them, but I don't recommend getting one. They are super difficult to work with, and on more than 1 occasion the work took forever to be completed. In 1 situation they weren't able to get any of their vendors to pick up the work, and the HW company allowed us to find our own vendor to do the work. After calling around I quickly found out that the vendors I was talking to refused to work with HW companies as they pay as little as possible. Lots of issues, and I've never found a company that did a good enough job to change my mind.

Wendy Busa · Answer

Thanks everyone great feedback.

Jonathan Greene · Answer

It's an absolute no. Home Warranties are just like cozy blankets you order off Amazon for $11.21. They say they are going to keep you safe and warm and then they unravel in two days and don't live up to the expectations.