Home Warranties Are they worth it?
I have seen ads for home warranties and of course the company tells me how great they are for rental property. Here is what I have been offered:
Do they really give what they promise? Are they really worth it or are they too good to be true? It would be this price for each of our 12 units.....so the cost would be about $6000 per year. However, our units are old and there are lots of issues that come up every now and then the various systems.
What are you opinions on home warranty systems?? For or against? Worth it or not? Thanks.
Discounted Rate As Per My Supervisor!= $495.00 for 1 year (Normally the price is $660.00) + 1 Free Month! = For Total Plan
(The Discount Expires 09/22/22 @ 7:00 PM EST)
Total Plan Includes:
- Air Conditioning System
- Heating System
- Plumbing System
- Plumbing Stoppage
- Electrical System
- Water Heater
- Ductwork
- Clothes Washer
- Clothes Dryer
- Refrigerator
- Oven / Range / Stove
- Cooktop
- Built-In Microwave
- Dishwasher
- Garbage Disposal
- Ceiling & Exhaust Fans
- Garage Door Openers
- Whirlpool Bathtub.
Great Reputable Review Sites to check Out:
Reviews
https://www.usnews.com/360-reviews/home-warranty/choice
https://www.choicehomewarranty.com/home-warranty-reviews/
https://www.consumeraffairs.com/homeowners/choice_home_warranty.html
https://www.trustpilot.com/review/www.choicehomewarranty.com
Hello @Sandy Keller,
In my opinion, it depends on how old the appliances are. If they somehow made it to 8-10 years...they are highly likely to be on their way out very soon, which the warranty could benefit you.
However, it also depends on how skilled you are at doing the repairs yourself, as in many cases, the most expensive part can be the labor. For example, a small O-ring can cost under $0.99, while the labor to install could cost $80-$120.
Quote from @Alex Russell:
Hello @Sandy Keller,
In my opinion, it depends on how old the appliances are. If they somehow made it to 8-10 years...they are highly likely to be on their way out very soon, which the warranty could benefit you.
However, it also depends on how skilled you are at doing the repairs yourself, as in many cases, the most expensive part can be the labor. For example, a small O-ring can cost under $0.99, while the labor to install could cost $80-$120.
I am more concerned about systems like plumbing electrical and AC. Typically our manager buys used appliances for cheap and all repairs of anything have to paid for as neither my mom or I are handy. They buildings with the electrical, plumbing, AC, and even appliances are all old and we have frequent repairs, but I am wondering if the warranty company really will repair replace in such old buildings..... They say they have no age limit, but I am skeptical because I know they want to make money too.
Each time I speak to an investor that has purchased a home warranty; they complain about it. If a tenant's air conditioning goes out in July, are you going to wait to file a claim, get it approved and then fix it? I doubt your tenants will be willing to wait more than 24-48 hours. Maybe you need to repair it and then submit receipts and wait months to get paid. Choice charges a $85 service fee that you need to pay to the tech when they arrive (not matter how large or small the repair is). Most plumbing stoppages can be cleared by a handyman for less than $85. I would also read the fine print and see what is actually covered, what is not and what requires an additional service fee. Many of the items are limited to $500.
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Quote from @Charles Carillo:
Each time I speak to an investor that has purchased a home warranty; they complain about it. If a tenant's air conditioning goes out in July, are you going to wait to file a claim, get it approved and then fix it? I doubt your tenants will be willing to wait more than 24-48 hours. Maybe you need to repair it and then submit receipts and wait months to get paid. Choice charges a $85 service fee that you need to pay to the tech when they arrive (not matter how large or small the repair is). Most plumbing stoppages can be cleared by a handyman for less than $85. I would also read the fine print and see what is actually covered, what is not and what requires an additional service fee. Many of the items are limited to $500.
Kind of what I figured. Things that sound too good to be true, often are. :) But I wanted to hear what real people said who had or knew someone who had experience. :)
I had a couple home warranty claim experiences from my past real estate clients and the short answer is: If the seller throw it in, why not take it. If you have to get one yourself, definitely not worth it and here is why:
1. Ask them about deductibles. Most home warranties have a $700-1000 deductible and most minor house issues can be fixed less than that, so not worth it in minor issue case.
2. Here is the big one, pre-existing condition, this is the insurance company's golden ticket for getting out of large ticket claims. Home warranty policy only covers something that was good and functioning when you started the policy and then break down during the coverage period. Most of the major items that exceeds $700-1000 repair cost don't just break down suddenly. And the insurance company is going to try their best to make an argument that it's a pre-existing condition occur prior to the coverage period started.
Sure, once in a blue moon you get something broken down that fits their coverage (the one I can think of is major expensive appliances), but the combination of $500 premium for one year with the deductible and the mentality of getting out of claims as much as possible is not worth it to me.
My property management company doesn't honor home warranties. It's a huge hassle for the owner and me. Then the tenant waits forever for repairs, which would make my company look bad. Plus, if the home warranty company can find a way not to pay for something, they will.
Rip off in majority of cases. The insurance company drags their feet, hired crap contractors that do crap work and often band aid the issue so its continues to be an issue over and over.
Yes every now and then you might hit a home run and it paying out well, but most of the time you are better off paying for the repair yourself.
Quote from @Dena Puliatti:
My property management company doesn't honor home warranties. It's a huge hassle for the owner and me. Then the tenant waits forever for repairs, which would make my company look bad. Plus, if the home warranty company can find a way not to pay for something, they will.
This.
Short answer, no, home warranties are not worth it.
We had too many negative experiences and won't go anywhere near them now. Not only do they cover a limited amount on major reapirs, but as a landlord (depending on your state habitability laws) you may be required to do the fastest repair, not the cheapest. Judges don't care that you are saving money by having a warranty; they want the repair to be made quickly for the sake of the tenant. And warranty companies often contract with the bottom tier of repair companies. Not worth the aggravation.
A truism: Businesses exist to make money.
This warranty company is making money, which by default means that the owners of these policies are paying in more money than they are getting out in repairs. Don't think even for a second that they will just replace your HVAC unit just because its old and stopped working and they are going to suddenly buy you a 6k new HVAC unit just because you bought an insurance policy for $495. They will nickel and dime you to death putting a bandaid over a gunshot wound, anything to avoid buying a new unit, and each time they send a repairman to put on a fresh bandaid you must pay another deposit fee.
They are also super slow to respond to anything, when an appliance breaks you don't have time to wait a week for them to send a technician to the home to verify that it's broke, then the technician goes home and 3 days later he submits his bid to the warranty company, then 3 days later the warranty company tells the technician the bid is no good and he needs to find a cheaper way to fix it. Another 3 days pass and the technician submits another bid which gets approved. Unfortunately by this time the technician is on vacation and can't do any work for a week. Then it takes 2 weeks for parts to be ordered and the next thing you know it's been a month or two with the tenant not having an HVAC unit and the tenant is threatening lawsuits for uninhabitable housing. Then when the repair man does come to fix the HVAC unit he tells you Freon isn't covered by your warranty company and therefor bills you directly for $400, along with your $99 deductible just for having a repair man come to your house.
Kind of what I figured. With all these replies, I'll never again even think about an ad I receive from a home warranty company. Glad I never wasted money buying one. :)
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Never heard of one that actually paid off. Never. Just my .02. Same with car warranties.....
It's just like insurance: the house always wins.
They will be slow to respond, they charge a trip fee, and they use low-quality vendors to handle the work.
You'll hear some success stories, but you are far more likely to hear people disappointed by the service.
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@Sandy Keller, I agree with @Nathan Gesner
Any purchased warranty is basically like buying insurance and insurance companies always make great profits at your expense in the long run aka "the house always wins".
So, I always recommend skipping any kind of insurance or purchased warranty if you can budget or be prepared to handle the issue(s) when it arises. In the long run you will save.
However, if for example you are just starting out or are not in a position to handle issues that come up where they might cause you to miss mortgage payments etc, then I could see the logic in buying a home warranty until you could build reserves etc and get in a better position.
Insurance and purchased warranties aren't to "save money", they are to protect you from risks you are not able to handle on your own.
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@Sandy Keller they are better suited for owner-occupant housing where the owner experiences the CHALLENGE of dealing with them.
Too much work for a PMC to deal with, yet owner not understanding.
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never again, same like car warranty,etc....it's creating stress when talking to them.
NO they are a terrible deal. Any insurance company can quote you a percentage of revenue that is paid out in claims. In the medical insurance in the US, a minimum of 80% of revenue must be paid out in claims by law.
Home warranties typically pay out less than 20% of total revenue in claims. The remaining 80% goes to marketing, salesperson commissions, company profit and overhead. I even had a salesperson tell me "It's actually not really insurance, it's a sales tool to sell more homes".
If you expect to get more than 0.20 for every dollar paid into the insurance, you are a fool.