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Are Home Warranties Worth It?

As a home buyer or home seller, you may have wondered whether a home warranty is worth the cost?  Homeowners insurance protects your home against unforeseen accidents or damage.  A home warranty, on the other hand, is a supplement to this insurance.  Simply put, a home warranty is a convenience program that covers normal wear and tear on the major electrical and mechanical systems in a home, typically for a one-year period.

Glendale Real Esatate photoSo, your home’s ventilation, heating and air-conditioning, plumbing, water heater and kitchen appliances are typically covered by a home warranty.  Home warranties have become more popular in the past decade or so, with the advent of foreclosures and short sales, as these properties often haven’t been well-maintained.  However, be sure to read the fine print on any home warranty.  Be sure to note what exactly is covered and what isn’t.

Another wrinkle with home warranty plans is that they don’t offer quick fixes to any problems that are discovered within the home.  Home warranties are not the same as emergency home service contracts, where the homeowner can make a phone call and have the problem diagnosed and fixed within the same day.  Instead, with a home warranty, the homeowner will have to file a claim, and the home warranty company will choose a local service contractor to diagnose the problem for a service fee, which isn’t covered by the warranty.  Then, the claim must be approved by the company.

While a home warranty can be a nice back-up plan, it’s critical that any homeowner identify any necessary repairs during the home inspection period.  The home inspection will typically uncover any major issues with the maintenance of the home, and will set a precedent for regular service of the major mechanical services.  For example, some home warranty companies won’t cover an air-conditioner that hasn’t been serviced in a past set number of months.  Therefore, having this done during the home inspection negotiation period will help to set up a seamless transition to the home warranty service period.   Home warranties in Arizona average around $400-500 depending on the type of home (condos/townhomes typically are on the lower end of this spectrum).

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