Need Advice on Home Warranty Plans

8 Replies

Just say no.  Warranty company’s are in business to make money, which means they cost consumers more money than they pay out.  This is a business, not a gambling arena.  Find a good used appliance dealer instead.  I manage for some owners who unfortunately have warranties.  We end up with tenants who go without fridges and stoves for weeks.  It it totally unacceptable.  I would never have one for my own rentals.

I'll second @Patti Robertson remarks. I've tried a couple of reputable warranty companies without success. They send the worst third party contractors, authorize the least amount of repairs, and take an unacceptable amount of time to dispatch folks and make decisions on how a repair/replacement is to be handled, while your tenants are without their appliance what seems like FOREVER. You will regret trying any of them out and wish you had self insured and just taken the $500 per house and used it for reputable appliance repair person and used dealer. The one exception I'll make is I do have AC service plans through my Gas/electric company (BGE in MD) that has no deductible and they have their own techs to dispatch so service is prompt and competent. I pay around 20/month. Its actually less expensive than a warranty plan, but they will not pay to replace your HVAC unit once it dies and there are no available parts to bring it back to life. It has helped me justify extending the life of some of my units. Many other states offer these types of plans through your gas/energy company so you should look into that if you are concerned about AC unit being old and not wanting to proactively replace.

First, I will say that home owners warranties are a complete pain to deal with. Dealt with one this year for a tenant fridge. I ended up taking $100 off the tenants rent for the hassle we went through. But, I will add two points to this. One, the warranty did pay for a brand new $750 fridge, while I paid a $100 deductible. And two, at least around here, it's common to ask sellers to pay for one year of home owners warranty. And, even if they won't, I would absolutely pay the $600-700 for year 1 of owning a property. It gives piece of mind for large capex repairs in year one, and that first year can be a killer if the HVAC goes out.

FYI: I have HSA Home Warranty. Can't exactly recommend them. I imagine they are all a pain to deal with. They aren't in business to pay for repairs, but to collect your money. 

Originally posted by @Anthony Wick :

First, I will say that home owners warranties are a complete pain to deal with. Dealt with one this year for a tenant fridge. I ended up taking $100 off the tenants rent for the hassle we went through. But, I will add two points to this. One, the warranty did pay for a brand new $750 fridge, while I paid a $100 deductible. And two, at least around here, it's common to ask sellers to pay for one year of home owners warranty. And, even if they won't, I would absolutely pay the $600-700 for year 1 of owning a property. It gives piece of mind for large capex repairs in year one, and that first year can be a killer if the HVAC goes out. 

FYI: I have HSA Home Warranty. Can't exactly recommend them. I imagine they are all a pain to deal with. They aren't in business to pay for repairs, but to collect your money. 

in our market its pretty much standard that all agents representing a buyer will ask for this and I am like you... sure thing.. its just the cost of doing business.. and I also pay for a 2 10 on the new homes I build.. again gives buyer comfort and those are less than a grand. so you can see what kind of things go wrong on a house that cost 300k to build and it only cost less than 1000 to insure those things for 10 years.. NOT MUCH.. but it does keep from having call backs and if there is a water landing they know they have insurance.. at the end of 10 years our builder warranty is up.. and then on top of that I Pay 30k up front for a project policy that covers all the houses in that particular community for 10 years as well.. this is for 1 mil and basically its used to hire attorneys if we get sued for builder defect.

so in essence on a new build we are paying on the 25 house communities we built the last two years total of 50 homes.. about 110k in insurance to cover us for 10 years.. the issue is the subs get sued first then the GC then me the developer but subs being subs 6 years from now they are out of business or moved on so then its the GC's insurance then us.. And you cant just kill the LLC that built the houses an underfunded LLC in the eyes of the court is no protection and you become personally liable.. Little bit of thought has to go into these things up front.. and well I hate paying for this insurance but when you have 25 million of exposure whats 110k really.. and of course this is why you have no affordable housing we just pack it into the sales price.. Just like in our market permits cost 40k per house

and the planners and city gods wonder why we can deliver a house for 200k all in  not possible in our market 300 to 350k is as cheap as you can go.

PS I tried buying warrenties when I was buying 50 to 75 court house steps houses a year.. waste of money.. 

Originally posted by @Anthony Wick :

First, I will say that home owners warranties are a complete pain to deal with. Dealt with one this year for a tenant fridge. I ended up taking $100 off the tenants rent for the hassle we went through. But, I will add two points to this. One, the warranty did pay for a brand new $750 fridge, while I paid a $100 deductible. And two, at least around here, it's common to ask sellers to pay for one year of home owners warranty. And, even if they won't, I would absolutely pay the $600-700 for year 1 of owning a property. It gives piece of mind for large capex repairs in year one, and that first year can be a killer if the HVAC goes out. 

FYI: I have HSA Home Warranty. Can't exactly recommend them. I imagine they are all a pain to deal with. They aren't in business to pay for repairs, but to collect your money. 

 Analyzing what you stated: Lets say you paid $600 annual premium for that rental warranty. Then you paid 100 deductible and discounted 100 for tenant trouble. You just paid $800 for a $750 fridge:) Then you have the pleasure of paying $600 the following year:)  Just some food for thought... What was your actual premium if you dont mind sharing?

Avoid. Go to Facebook and read all the comments on their websites after they post something. You will see the themes. We had one and I second all previously stated thoughts.

@Jeff Bridges  Your math is pretty accurate. However, your analysis is missing a couple things. First, the warranty was paid by the sellers of my property, so it didn't cost me anything. I think the seller paid about $650 for 1 year warranty on my duplex. It's fairly standard around here to ask seller to buy 1 year of home owners warranty. Also, I think for a new owner, it isn't just about the immediate math. Perhaps you purchase one yourself and you never use it. That's $650 you never needed to spend. But, it works like insurance. You purchase it to avoid a major cost. And I think if you're buying a multi-family unit, it's a great idea for the first year, especially if you don't have the capital or business assets to cover a major expense. If you're just starting out, that 12 months of no worries on major capex could be make or break. And, now that the capex reserve account is high enough from putting away 100% of net income, I won't be renewing that warranty. 

The house always wins. Home Warranties are restricted on what they cover, they are often difficult to process a claim through, and they use sub-par contractors to complete the work. Most professional property managers will not even manage a property with a home warranty in place because it's a disaster waiting to happen.

Just say no.