Home Warranty Plans, yay or nay??!

Dubois, IN · Member since 2016 · 120 posts · 16 votes

What's everyone's opinion on buying home warranty for your rentals??? My real estate agent suggested it. I never really thought about it...... Any input would be great!

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Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

As I work here at BiggerPockets, I must temper my comments. Plus we don't allow profanity in the forums. But I would say (nicely) that it should be a crime punishable by multiple years in prison to murder a tree in order to print the worthless policy out.

Absolutely nothing that breaks is covered.

[email protected]Podcast Guest on Show #261

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Joe FunariBusiness Member
Real Estate Agent · Keller, TX · Member since 2017 · 850 posts · 825 votes
9y
@Carrie A. If you have a separate property management company managing your rental I would say no. Save the money and put it in your "maintenance" budget for your rentals. Also, consider if you are buying a property thru MLS it is standard practice to have the seller pay "x" amount towards a home warranty. Have your agent negotiate that number off the sale price. That will help you cash flow a lot more especially if your financing your rentals.
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Eric Moore
Lender · San Antonio, TX · Member since 2013 · 88 posts · 21 votes
9y
@Carrie A. I would consider how old your dwelling is. If your house looks like it's going to need a new roof, water heater, etc soon it may be worth it in the short term to have homeowners insurance to fix those big needed items.
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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
9y
As I work here at BiggerPockets, I must temper my comments. Plus we don't allow profanity in the forums. But I would say (nicely) that it should be a crime punishable by multiple years in prison to murder a tree in order to print the worthless policy out.
Absolutely nothing that breaks is covered.
[email protected]Podcast Guest on Show #261
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Gail K.
Augusta, GA · Member since 2014 · 1k+ posts · 1k+ votes
9y
I agree with Mindy. And that includes buying warranties on appliances.
Gail
2 Reply
Steve B.
Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
9y
Look at previous posts. They are terrible. RE agents promote them because they are attractive to unsophisticated buyers
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Steve B.
Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
9y
Eric Moore what homeowners policy let alone home warranty is going to cover replacing a roof unless the damage is post-facto to paying the policy, and caused by an insured event?
1 Reply
Amy KendallBusiness Member
Real Estate Broker · Lehi, UT · Member since 2016 · 397 posts · 318 votes
9y
I have never myself had a good experience with a home warranty. I have negotiated many into many deals, because for some unknown reason, it makes some people feel safe ( most likely because the client has no experience with them yet) I have had multiple clients who have had issues a few months in and we even provide inspection reports saying things were working, we can't get them to cover replacing. On top of that, you have to pay a "service fee" to get someone ( someone the warranty company has designated) to come diagnose the problem. I haven't had a good experience with any of them, I always give my clients the examples I have had experience with and let them choose for themselves. I don't negotiate them into my own personal contracts anymore....
5 Reply
Austin Fruechting
Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
9y
Insurance companies wouldn't sell these if they didn't make money on the amount you pay vs what they pay out. Just have a reserve account and pay for it yourself and you'll get to keep the spread that the company makes selling them.
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Carrie A.
OP
Dubois, IN · Member since 2016 · 120 posts · 16 votes
9y
You guys make very valid points! That's why I ask you all!!
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Vivek Khoche
Investor · San Jose, CA · Member since 2017 · 343 posts · 102 votes
9y
@Carrie A.- I do carry home warranty (Fidelity) for my high end CA rental. My experience has been pretty positive. I have recovered most of the money paid toward insurance. I do have property management company to manage my rental. May be I am lucky to get benefit of others paying and not finding any value.
Good Luck
Vivek
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Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
Carrie Albertson Mindy Jensen Carrie Mindy is right. You can file that warranty in the garbage can along with the extended warranty for your car, your refrigerator, and your electronic device. We use the offers that come in the snail mail here along with the credit card offers to start fires in the stove on cold days here in alaska because they don't even work well as TP. RR
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Mark Payne
Germantown, TN · Member since 2016 · 25 posts · 5 votes
9y
I have had mixed results, all with American Home Shield. The warranty was in place on our home when we bought it. Our house was built in 1993 and has has it's original HVAC system (3 condensers and 3 evaporator/furnace/air handlers). The home also has a pool with it's original equipment (2 pumps and a filter). We also have a roof that's nearing the end of it's useful life (not covered by the warranty). We took an overseas assignment and began renting the house, so the system updates were put on hold and the warranty was renewed. Using the warranty I've had the following replaced/repaired without issue:
1 of our 2 water heaters replaced
A Dishwasher Replaced
An in-wall water leak repaired
Pool filter (sand) refurbished
Cracked Water Pipes (Pool) Replaced
Evaporator Coil Replaced
2 Furnaces Repaired (Make sure your filters are clean or they'll reject the claim for lack of routine maintenance).
Where they really suck for us is Air Conditioning equipment. They obviously do not want to replace a condenser so every time we get a call on one (at least twice a year), they just clean it and top off the coolant. They limit the coolant covered by the warranty and rip you off on the extra. So much so that we've stopped calling them for HVAC maintenance. We usually get the system repaired for less than half of the co-pay and coolant charge combined. If our guy ever says a unit is toast, we'll then call AHS and push them to replace it. Also, they own Greenway Home Services. So, for general home repairs that's who we get, at least in Memphis. They suck. Our experience with every other contractor that works with them has been great. But Greenway sucks. Did I mention that Greenway sucks?
I really haven't done the math but I think we're hovering just below the break even point with the premiums. It's pretty much a policy we keep in place in case of multiple failures of expensive systems. We have upgrade plans in place, and when we're done, we'll cancel the policy. I can't really recommend a warranty, but I can say it's served it's purpose for the most part.
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Walt Dockery
Investor · Winter Park, FL · Member since 2017 · 171 posts · 165 votes
9y
Had one at my first house (came with it), as others have said they aren't worth much and for the most part don't cover anything big. One example I was given was if there's a plumbing leak, the home warranty will pay to fix the pipe but not the water damage. What they do cover, they still charge a fee for a service call and send their choice of service/repair technician whereas I would prefer to use my own people or someone recommended by someone I trust, not just whoever has the contract with the warranty company.
As a general rule, I only insure things where there would be catastrophic financial loss in the event something happened (ie homeowners insurance for major fire or hurricane damage or a lawsuit) and I generally carry high deductibles. Insurance for small stuff, like a broken dishwasher, isn't worth it IMO unless it's free or nearly free. Insurance companies make money, they charge premiums greater than the expected payout, I strongly prefer to carry a large reserve fund and cover small-medium repairs out of pocket.
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Brad LarsenPro Member
Property Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes
9y
@Carrie A.
NO on the Home Warranty. I could rail on this for a few thousand words, all would echo what is said above this post.
FYI: A Home Warranty being part of a real estate purchase through traditional Realtor workings could be part of their requirements for their Errors and Omissions insurance.
Some E/O policies will only waive a deductible if certain conditions are met such as several required forms - AND - a Home Warranty in the deal.
It's sort of a marketing ploy, but more a company policy of putting these as standard fare in a transaction.
Outside of the "freebie" you have from the purchase - do not renew and do not ask your property manager to conduct maintenance through the red-tape BS of using a home warranty. Your tenants and manager will hate you.
1 Reply
Mateusz Prawdzik
Developer · Little Ferry, NJ · Member since 2016 · 426 posts · 226 votes
9y
@Carrie A. For my flips I always give everyone the home warranty because if they ever call me after the house is sold, it's not my problem, I tell them to deal with the warranty customer service. But I can vouch for it that it doesn't work. It's a load of crap, they will play with you until you get fed up and have to do it yourself, TRUST me first hand experience....
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Mateusz Prawdzik
Developer · Little Ferry, NJ · Member since 2016 · 426 posts · 226 votes
9y
This was one of my flips.. I had to replace, the sewer line and water line... after battle for 3 months for them to do it, it came out that I didn't want to waste any more time and I told them to go * themselves and I paid couple guys to dig the whole and have my plumber change everything, ran me about.... 2500 for it all.
So I learned that it is a big game they play and I absolutely hate it.. I give it to my end buyers anyways because it's less headache for me for $900.. Don't want to deal with stuff like this.
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Robert GilstrapPro Member
Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
9y
Home warranties play on Americans incessant desire to get something for nothing. It is nothing more than a feel good piece of paper for sale. From a property management standpoint HW are the devil. 1-2 hour hold times to report a claim, substandard vendors, subpar work, pissed off tenants, unnecessary delays when parts are required and there's always the "yeah we cover x, but your problem is y & z which we don't cover..."
Complete garbage.
[email protected]770-480-7301
2 Reply
Cam Jimmy
Investor · Anchorage, AK · Member since 2016 · 222 posts · 294 votes
9y
@Ralph R. I gotta give you an "LOL" on that one :)
0 Reply
Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
@Cam Jimmy thxs. RR
1 Reply
Ariel Smith
Rental Property Investor · San Diego, CA · Member since 2016 · 306 posts · 205 votes
9y
@Carrie A. I've had a range from good to bad experiences with them for my clients. Some clients have loved them and thought they were amazing and others have been very disappointed with the service (or lack thereof). Often times my brokerage will buy the policy as a client gift which gives many clients peace of mind. Also, for our E&O insurance, they require us to have a policy for a certain percentage of our transactions (I forget how many), so we suggest, but do not require, them for that reason.
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Ariel Smith
Rental Property Investor · San Diego, CA · Member since 2016 · 306 posts · 205 votes
9y
@Carrie A. For reference, we use Fidelity Home Warranty here in Northern CA. Same as @Vivek Khoche, so maybe they work better in our area.
2 Reply
Ned J.Pro Member
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
9y
I live in CA and have a rental in TX and its has worked for us.....mainly due to the distance issue and property self management. I ve had quite a fee items replaced and fixed over the years.... the biggest being the water heater. Tenant says something is broken/isn't working.... I call the warranty and they make all the arrangements to fix it and I pay some fee like $60-75.....
I haven't run into the "well we don't cover that"....at least not yet....... the ease of using it has made it worthwhile for us and I'm pretty sure we haven't lost $$, at least not much vs not having one...
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David Faulkner
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
If you think that you are smarter, better at statistical analysis, better at finance, and better at law than the insurance company, and their armies of lawyers, accountants, actuaries, and adjusters that they hire to design and administer insurance policies with the sole purpose of making them profit, then by all means, buy the home warranty. If not, then you already know who the sucker in the transaction is going to be.
1 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
9y
Never heard anyone do that before. Home warranties are usually for people who buy homes. If you are a sizable landlord, you'll get good at getting your buildings repaired.
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Adrian Chu
Real Estate Broker · Seattle, WA · Member since 2014 · 1k+ posts · 427 votes
7y
I think it depends what part of the country too. Here in Seattle, every plumber/electrician/HVAC/appliance service call is easily $200, not including the cost of the repair. I just spent like $800 repairing the control panel on my oven (a 14 year old JennAir oven that retails at over $2000). I also spent almost $3000 getting a furnace replaced during a snowstorm here. Wish I had home warranty to cover for that.
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