Home Warranty for an Investment Proeprty?

[Brandon Sturgill]

Does anyone buy a home warranty for your rentals...is this even feasible?

[Steve Rozenberg]

We prefer that the owners do not use a Home Warranty Company to make repairs at their rental property.

There is a HUGE problem in the home warranty industry and the public is becoming savvy to it.

Try searching Google with the name of your favorite home warranty company and the word `complaints' or `fraud'. You will be amazed. Find out how many people feel like they got burned, turned down wrongfully or got seriously bad service. Furthermore, feel free to visit www.my3cents.com for even more examples of this currently growing problem; THERE ARE MANY OTHERS.....

Almost Every time we call a home warranty company for a problem, they deny the service either on grounds of lack of maintenance or abnormal wear and tear. How do you define abnormal wear and tear and lack of maintenance? When it comes to exclusions and small print, warranty contracts say a claim can be denied for lack of maintenance, improper maintenance, improper installation, pre-existing problems, code violations and numerous other reasons.

Warranties are typically purchased by home sellers or their real estate agents to avoid lawsuits if something breaks in the first year. Not to be confused with a builder's warranty, a so-called home warranty -- Actually a service contract -- is typically purchased for existing homes, especially homes sold by real estate agents. These service contracts generally cost $300 to $600 for a year-long basic-coverage plan that includes items like ceiling fans, water heaters and furnaces.

The contracts come with loopholes. You need to carefully read your service agreement to determine what is and what isn't covered. Coverage for plumbing for example, typically ends at your home's foundation, so leaks or breakages beyond that would be your responsibility. "Pre-existing" problems typically aren't covered, nor are breakdowns that result from poor maintenance or improper installation. The contract also may require that a system be upgraded to current building code standards -- at the homeowners expense -- before they agree to consider repairs. People who have had problems with the home warranty companies say that the more expensive the repair or replacement, the more likely home warranty companies are to invoke these exclusion clauses.

You don't have control over who does the work. The home warranty provider contracts with local service companies to perform the actual inspections and repairs. You don't get to choose and scheduling repairs can sometimes be a trial. The service technician may also try to sell you unneeded services.

We have had hundreds of problems with home warranties.

We had a bathroom faucet go on the blink; we called the Home Warranty Company. After paying the $55 deductible, their contractor refused to make the repair. So we had our plumber go out and they made the repair for $65. We have experienced this over and over where the owners are spending money on deductibles and then we have to send out our maintenance people to fix the problem.

Our next problem came in the form of a malfunctioning air conditioner. After 2 days with the tenants having no A/C and paying a $50 deductible, The service technician reported that there was lack of maintenance and therefore it had to be replaced and cannot be covered under the Home Warranty. They gave us an estimate of $4,000 to replace a 6 year old A/C system. Also the tenants are staying in a Hotel and want to be reimbursed for their expenses. We sent out our A/C vendor and he said the A/C unit is perfectly fine except that a small part had to be replaced; total cost from our vendor was under $200.

On another property, a dishwasher repair was needed. The home warranty company took 3 months and had make 15 trips out to the property to repair the dishwasher. If you were the tenant how would you feel?

On one property the A/C went out in the summer and it took 21 trips and 3 months before the warranty company finally replaced the A/C. You can be sure the tenants moved as soon as their lease agreement was up. Other tenants would have gotten an attorney and been suing the owner.

Often they will leave tenants hanging without heat or A/C for days while they go through their "second opinion" process. If, as a property manager, I wanted to damage my reputation with as many tenants as possible by providing the lousiest repair service possible, I can't think of a better way to accomplish that than by using a warranty company on all service calls. They simply are not compatible with the level of service we demand of our vendors.

Our owners have been burned so many times in years past that we finally decided we had enough, and said "no more". Nothing affects the reputation of a property management company more than the manner in which repairs are handled. Tenants judge us by almost no other measure. It therefore makes little sense to entrust vendors we don't know, whom we have no relationship with or control over, with the reputation of our company and the relationship with your tenant. Instead, when repairs are needed, we will send our trusted vendors with whom established relationships exists and they will provide the quality service we require in a professional and timely manner. That said, if we determine through our own vendor that a covered mechanical item in your home has failed or is in need of costly repair, we will endeavor to get whatever Home Warranty company you have out to honor the warranty, provided that they accomplish the service call and repair in a time frame and manner that is reasonable and just to all parties.Take a look at Paragraph 18 section F of the tenants lease agreement 18. REPAIRS:F. NOTICE: If Landlord fails to repair a condition that materially affects the physical health or safety of an ordinary tenant as required by this lease or the Property Code, Tenant may be entitled to exercise remedies under §92.056 and §92.0561 of the Property Code.span>If Tenant follows the procedures under those sections, the following remedies may be available to Tenant: (1) terminate the lease and obtain an appropriate refund under §92.056(f); (2) have the condition repaired or remedied according to §92.0561; (3) deduct from the rent the cost of the repair or remedy according to §92.0561; and (4) obtain judicial remedies according to §92.0563. Do not exercise these remedies without consulting an attorney or carefully reviewing the procedures under the applicable sections. The Property Code presumes that 7 days is a reasonable period of time for the Landlord to repair a condition unless there are circumstances which establish that a different period of time is appropriate (such as the severity and nature of the condition and the availability of materials, labor, and utilities.)

Tenants have more rights now than they ever have had in the past and Judges are normally on the side of the tenants. If repairs are not made timely, owners can find themselves on the wrong side of the legal system. It is hard enough to try to use a home warranty on the home that you live in. It is not cost effective or practical to use a home warranty on a rental property.

Our Broker will not use any existing Home Warranty Company for "first responder" service calls to the property, under any circumstance. Covered items that need replacing will be run through the Home Warranty Company only after an initial determination is made that replacement may be necessary.