Home warranty...scams or helpful?

[Simone Montague-Jackson]

Hey there, 

I've been house hacking for a year, which has been great, but I've had a few issues with the house. I need to fix the garage, garbage disposal, and there's possibly mold in the attic (don't know how true this is since the guy who cleared my vents was getting me to purchase his service for $2k). My realtor recommended I get a home warranty to protect against issues that could cost me $1000s of dollars. While my home is new, I'd like to maintain it well, and I plan to do this with all of my properties because I like taking care of my possessions. 

Any thoughts and recommendations on home warranties in Austin or Texas in general? I was recommended to get the Sears home warranty since it's more affordable and more effective, but I'd like any help in this department. 

Thank you!

[Charles Carillo]

@Simone Montague-Jackson

I always suggest that investors and homeowners avoid home warranties.

"the typical home warranty costs $450 annually, and only 25% of premiums are paid to homeowners. The company providing the warranty keeps most premiums as revenue and profit."

https://www.ramseysolutions.co...

https://www.zanderins.com/dave...

Every time I hear about property warranties, it is when something major goes wrong, and the tenants are complaining (rightfully so). The warranty company takes its time accessing the situation, and then they tell you there is a deductible; they only cover so much that you need to use their preferred company, which will take three weeks. All the while, the AC is out, and it is July.

It is much better to add a reserve fund to it monthly. If you know that something major will need replacement in the future, increase the monthly amount you deposit into your reserve fund. When something goes wrong, you can find the best contractor for the job who can make the repairs right away. Now your tenants are happy, and you have minimized the time you would have spent speaking to your tenants about the delay or fighting a warranty company.

[Simone Montague-Jackson]

Gotcha okay thanx for telling me this. I wasn't sure if I should get one or not. After leaving the property and renting it out, I'm gonna hire a property management company which will have a maintenance account to take care of such issues. 

[Jordan Moorhead]

I don't like them personally. Typically I find after I've owned the home for a year the cost of a home warranty isn't worth it and I can find people to do repairs at a pretty good cost. I also find all of their contractors make up problems or make things sound worse than they are.

[Drew Sygit]

@Simone Montague-Jackson agree with @Charles Carillo and @Jordan Moorhead, that they aren't what the marketing hype claims.

Insurance companies are in business to make money, which requires them to have a hard stance on claims and incentivizes them to deny as many claims as possible.

In our opinion and 24 years of observations, it worse with warranty insurance products!

Can't think of one time, in last 24 years, that a home warranty has actually paid out a claim. Their systems are set up to "deliberately" delay claim filings, supporting service calls, claim approvals and scheduling actual work - such that an owner is usually forced to fix an issue to keep a tenant happy or for property preservation. This typically voids the coverage and the claim is then "conveniently" denied.

Check out what the nonprofit, Consumers Reports has to say about them:

https://www.consumerreports.org/buying-a-home/what-to-know-a...

[Michael Norris]

What you are describing is called adverse selection - you have a known issue and want to buy an insurance policy to fix your problem because that is less than what it would cost to have the work done and you pay directly to the trades. 

It is the equivalent of crashing your car then trying to buy insurance to fix the car after the fact.

A home warranty or homeowners insurance policy will not pay for mold because mold is a maintenance issue.

You didn't say what is wrong with the garage - if it's a broken door opener that is typically covered on a home warranty.

My experience is mixed with home warranties and I can 100% tell you your satisfaction comes down to the local trade person that shows up.

The home warranty company does not employ trades - they contract them locally at a fixed rate for the work performed sort of like how car mechanics are paid. 

There was one HVAC company locally that was the #1 call the home warranty company made based on their internal scoring system. This contractor's hustle was writing up the repair as quickly as possible in such a way the claim was denied and collect the warranty deductible typically $150 or $200 and get out of there.

 The warranty company denies the claim based on the contractors word and he was off to the next job and the homeowner is left pissed at the warranty company. I guess $150 an hour (the deductible) and not having to do any work was a good plan for the contractor. (He wrote up my heat pump for being improperly wired - it wasn't)

I fought back and had a secondary inspection done the second contractor says what the real problem was and my heat pump was replaced ($8000+). I don't blame the warranty company for relying on what a local shady contractor said at the time. I do however blame them for continuing to use that person after many complaints. 

[Simone Montague-Jackson]

Wow thank you for all of your input. I'm glad I didn't purchase one and kept thinking I needed one. So, the best course of action is to have liquid cash for repairs and trusted contractors who are willing to fix the issue at a good price ? Is this what you do with all of your rentals?