Should I get a Home Warranty when Buying a House?

You may not be surprised to find a company recommending that you buy their product. But we are confident that if you thoughtfully reflect upon the considerations set forth below, you will reasonably conclude that the purchase of a home warranty has much to recommend it.

What is a home warranty and how will it help me?

A home warranty policy is a contract between the issuer/service provider and the identified buyer(s) of a specified home. Just like any other contract -; insurance in particular -; the contract should be read closely, in order to determine which appliances, components, and circumstances are covered. Like any contract, the warranty policy will contain definitions, exclusions, and limitations; know and understand them. With regard to any contract, it is best never to “assume” that something is covered; if there is a particular system or appliance that you are concerned about, read the relevant policy language closely.

Every home purchase is stressful

Common sense, practical experience, and research all confirm that the purchase of a new home, and relocating one’s household, is one of life’s most stressful events. There often are financial anxieties. Packing and moving personal possessions is, in itself, tiresome and frustrating. But for every home buyer, and particularly for the first-time buyer, the greatest single source of anxiety is the uncertainty associated with the viability of major house systems (HVAC, plumbing, electrical) and appliances. There is the daunting realization that all responsibility for repairs and maintenance now rests upon their own shoulders; there is no landlord to call or to bear the cost. Fortunately, there exists a simple device to reduce the financial risk associated with systemic or appliance failure. That simple device is the home warranty, and 2-10 HBW has options for buyers.

The real estate transaction

Keep in mind that all real estate transactions involve some level of uncertainty. As most of the risk of that uncertainty rests with the buyer, it is incumbent upon that buyer to take measures to take measures to reduce that uncertainty. For example, in most cases your sales contract will obligate the buyer to have all inspections performed rather early in the process; therefore, several weeks may pass between the inspection(s) and the closing of the transaction. During this interim both the seller and buyer will be distracted by their other obligations and will not necessarily be focused upon the appliances and systems, leaving open the possibility that a condition might manifest itself without the knowledge of either party. Typically, a buyer will conduct a “walk through” of the property just before closing to ensure that nothing material has changed. But this walk-through is not a full-blown re-inspection and some conditions may not be apparent. A home warranty policy will reduce the financial risk associated with big-ticket items and allow the buyer to concentrate instead on other matters.

If cash is tight, peace of mind is easily available

In a typical home purchase, there will be no shortage of demands upon your pocketbook. These will typically include cash outlays for: earnest money, usually tendered with the Offer to Purchase; fees for all professional inspections (general inspection, and perhaps specific system inspection, water potability, septic evaluation, etc.); a survey may be prudent or required; some or all of the homeowner insurance premium will likely have to be prepaid; the balance of the down payment will be due at closing; new appliances, equipment or renovations may be necessary immediately; buyer may retain legal counsel, and the buyer may be paying for their own real estate brokerage services. So, the demands upon your purse are many. There may be little or no extra money available for that unexpected disaster: the dead furnace, the burst pipe, the leaking water heater, or the washer/dryer combo unit that gives up the ghost.

Maybe I’ll just roll the dice

According to Homeadvisor.com, this is a broad estimate of what you might expect to pay without home warranty coverage. These average prices will be affected by your specific location and other situation-specific factors, such as the age and efficiency of the unit.

Isn’t the Seller Responsible?

The precise duties of the real estate seller are dependent upon state law and the terms of the contract. In most states, a real estate seller is required to disclose to the buyer all “material” changes in the condition of the property, which may -; or may not -; include all of the systems and appliances listed above. In many states, the contract will recite that any “personal property” (appliances) included in the sale is sold “as is”, without any warranty or representation made by the seller. In any event, keep in mind that after the closing, the seller walks away with a check, and you become reliant on these appliances and systems. Rather than risking ill will, recriminations, or heaven forbid, lawyers, does it not make sense to address this uncertainty in a comprehensive, plain language, up-front, fashion? The home warranty policy enables you to do just that.

Conclusion

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Homeownership has for many generations been part of the American Dream, and clearly, it has much to recommend it. But like most worthwhile endeavors, ownership necessarily entails some uncertainty and risk. As a conscientious home buyer, you will reduce your financial risk and your anxiety level by purchasing a homeowner’s warranty from an experienced, reputable firm. Such prudence will enable you to spend more time worry-free enjoying the fruits of your labor.

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