Feeling like a chump: Home Warranty Claim

[Matt Huber]

Hello! I had an acquaintance with a real estate investor not long ago. He self-manages several properties, but also has a full time job which keeps him on the road quite a bit. He said that he purchases a home warranty for every rental; that way when something breaks, he can just call the HW company and leave it up to them.

As a relatively new landlord, this sounded like a fabulous idea. I purchased a home warranty for my single rental house from Select back in October. Three weeks ago the tenants reported that the pool/spa heater is malfunctioning. I happen to be out of town, so I call Select HW and report the claim. Two days later they send me an email saying they can't find anybody to make a service call, but that I can find my own provider then submit the repair estimate for approval. Lots of calling around to pool repair folks. Everybody is on vacation (it is late December, after all). One guy said that if a HW company is involved he won't even consider working with me. Finally I find somebody who will look at it. Repair estimate comes to about $1,700 (a new replacement heater would be about $3,000). Estimate and photos of unit (per their request) were sent a week ago, but they are still "evaluating" the claim. It seems to me they've been dragging the timeline out a bit.

Some recent web searching on the topic has rendered the expectation that they will probably deny the claim or offer a very small settlement. Some additional web searching nudges me toward the idea that filing a small claims suit would probably result in a favorable judgement, so long that I can provide evidence the claim is legitimate.

My gut reaction right now is get everything in order to file a suit, so when the denial comes through I can get the wheels moving as quickly as possible. Because properly "serving" the out-of-state HW company might be tricky, I was thinking of engaging my RE attorney to help. (Not sure if I can recover attorney fees as part of the suit in California - but I think not.)

In the mean time, I need to provide a working pool heater for the tenants. I will probably just have my pool guy install a new one while all of this transpires.

So there it is: feeling like a sucker with my dirty laundry hanging in the wind. Am I going about this the wrong way? The benefit of your experience, and any other advice, is greatly appreciated in advance.

[Jay Hinrichs]

Originally posted by @Joe Splitrock:

Don't be hard on yourself, but also be aware ALL warranties are a bad deal. Years ago I sold electronics and they pushed us hard to sell warranties, because they are pure profit. Even if something goes wrong, people forget to submit claims or claims are denied for a number of exclusion reasons. The fine print is a mile long. Even if there is a legitimate claim, the process is usually long and painful. Tenants get angry as it takes too long. A pool you can live without, but imagine a furnace, air conditioner or refrigerator! I am not sure filing suit is the best course for the dollar amount involved. My advice is consider it a learning lesson and stay away from all warranties in the future. Also avoid taking advice from this real estate investor, because they are not giving you good advice.

I just had this with a water heater that failed within the manufacturers warranty.. But there are tenants there and they need hot water yesterday. U dont have time to make a claim etc..

the only thing i can see that is a benefit of these types of insurance is simply offering them as a seller.. gives buyers some comfort . And can help push a home to closing over an aggressive inspection report.  Plus I think the service calls are always 50 to 75 bucks regardless.

Just like all the extended warranties auto dealers try to sell you at the end..  or the non stop calls from extended warranty companies on your car..