As economic concerns mount, homebuyers now more than ever want to be reassured their future home is a cash cow instead of a money pit. The average homeowner spends nearly $5,000 a year on planned home repairs and renovations, but the unforeseen breakdown of a home appliance or system can easily tack on a few thousand to that budget.
Although inspectors can identify potential problems, changes in assessments due to the coronavirus that may rely on seller-provided photos and video may leave buyers feeling leery. However, there’s one thing your seller can do to reassure potential buyers: purchase a home warranty.
“A seller may purchase a specific sellers home warranty plan for financial protection in case major appliances or home systems such as the water heater or air conditioning break down while the home is on the market or under contract,” according to an April U.S. News report. “In addition, home warranty companies sometimes offer free sellers’ warranties if the seller agrees to purchase a home warranty for the buyer.”
“Warranties are becoming a tool for sellers, and some companies offer them at zero cost,” it added.
For homeowners who need a refresher on home warranties, Inman sat down with Ben Joseph and David Moreno of Liberty Home Guard to discuss the ins-and-outs of the process.
Inman: This may seem obvious, but why do homeowners need to invest in a home warranty? What does it offer that home insurance doesn’t?
Ben Joseph: Home insurance is for infrequent but high severity events, like if a tree falls on your house. However, if your A/C system which can cost anywhere from $7,000 to $10,000, all of a sudden breaks due to normal usage, homeowners’ insurance doesn’t cover things like that.
Home warranties are to protect homeowners against things that happen frequently and aren’t existential crises for the home. At the same time, [warranties] help keep your home livable. You can’t live the same quality of life in your home if your refrigerator isn’t working or your A/C is out during the summer or if your plumbing, God forbid, malfunctions.
When something breaks down, a homeowner can submit a claim and request for service. We have three ways for consumers to submit a claim: they can call customer service, they can send an email to automatically create a claim in our system, and we have a customer portal.
Inman: As homeowners prepare to place their home on the market, what should they focus on repairing?
David Moreno: The things I would suggest paying closer to are definitely on the systems side more so than the appliance side. Of course, you want to make sure your appliances are in working order because that does add incrementally to the overall value of a home if you’re looking to sell it.
When a home inspector comes in, primarily what they’re looking for is whether or not the systems are functioning properly along with structural reviews. Pay close attention to your HVAC system and make sure you’re properly maintaining that because, in the event of a malfunction, it’s extremely expensive to replace and repair. The same is true of any water heaters, furnaces, and boilers. Ductwork isn’t as much of an issue if you’re cleaning it once or twice a year.
Inman: Are there any appliances or systems a home warranty doesn’t cover? If so, what can a homeowner do to get an unusual appliance or system covered?
David Moreno: Because we’ve got a fairly good-sized consumer base, we receive a lot of custom requests that fall outside of the standard coverage we provide. Nowhere in our plans do we cover specialty items. For example, if a customer has a waterfall or a special lighting system for their outdoor deck area, that isn’t something most home warranty providers will offer coverage for.
However, we’re properly licensed in the 39 states that we’re in and with those licenses, we can custom underwrite coverage for items we don’t cover under our standard policy. We underwrite custom coverage on a consistent basis, and we get some interesting requests. Ever since coronavirus hit, we’re getting a ton of requests on custom coverage for bidets and bathrooms. So, that’s one item that’s being more requested these days.
Inman: So, let’s get to one of the most important things — cost. What should homeowners expect to spend on a home warranty?
David Moreno: We try to keep it simple at Liberty Home Guard. One plan is for the appliances of the home, which is called Appliance Home Guard, one plan is for the systems of the home, which is called Systems Home Guard, and we have the Total Home Guard, which is a combination of both. As far as pricing, it varies based on state, location, and a number of other variables.
But, the Appliance Home Guard usually costs $399.99 a year, The Systems Home Guard costs $499.99 a year, and the Total Home Guard costs $599.99 per year (The average warranty costs between $300 and $600 per year.)
Inman: There are plenty of home warranty companies with similar prices and plans. Beyond cost, how can homeowners determine which company is best for their needs?
Ben Joseph: Unfortunately, there are a few entities in the space that will sell home warranties without the proper licensure and approvals from the state regulatory bodies. So one of the first things I would recommend a consumer to do is understand the licensing guidelines for their state. If they see there isn’t a licensing guideline for their state, they should find a state that does require licensure just to test the home warranty company.
Let’s say I’m in New Jersey, which is an unregulated state, but I call a warranty company and I want to make sure they’re not doing anything unscrupulous. I would call and ask about a property in Texas and whether they’d cover it or not, and if they’d be willing to validate their licensing status. Texas requires licensing and [asking about] that will bring any fishiness to light.
Other than that, try to read reviews, check out their website, research the brand’s presence online, and see how other customers and other stakeholders in the company really speak about it and regard it. The final thing I would do is call the customer service line and see their level of professionalism, and how well they can communicate.
At the end of the day, you’re buying a promise from a company that they will be there in your time of need. You want to make sure that the company won’t just talk the talk, but walk the walk.