Is a home warranty a good idea / necessary?

Question

Is it recommended or necessary to have a home warranty for your rental? One of the landlords I rented from had one so I was wondering if I should get one? I don't have one on my house right now as I am kind of against them but when I move out and put it up for rent, would it be a good idea?  Much appreciate any advise, stories, etc. Also, not sure if I posted this in the correct area but hope so.

Nathan Gesner · Answer

No. I know many Property Managers that will not even manage a home with a home warranty because they know how bad the service is. $500 to cover your major systems for a year sounds like a deal but do you honestly think a warranty company could stay in business if they were paying out on all those claims? The cards are stacked in their favor. They will reject claims, delay their response, send the cheapest contractor they can find, etc.

It's not worth it. Have a reserve and cover yourself.

Nathan Gesner · Answer

No, you didn't get my dander up! LOL! I have a tendency to respond quickly and factually and probably come across uglier than I would like. We're all good! :)

CJ Ashton · Answer

Home warranties are just like gambling...  The "House" ALWAYS wins.  Keep that in mind and decide accordingly.

Tracy Minick · Answer

NO way. If you are looking to be sued for the inability to provide repairs within the appropriate time frame then sign up! I have tried to use them and it has made me a bad landlord. Not worth it.

Deb R. · Answer

CJ Ashton thank you for your response and I hope to be the “House” 😊

Nathan G. maybe it’s that I didn’t expect that response from someone in Wyoming among the calming trees and mountains, I do miss mountains but would miss wearing shorts and sandals almost year-round.

Gail Dudlicek if I was selling I would supply a home warranty but that to me always seemed the only reason for it; and I know what a roof and A/C cost as I just had both replaced on my house and I have replaced the dishwasher, microwave, faucets so not coming in blind thankfully, and thank you for responding.

Ben Zimmerman sorry to hear about all your troubles with your first rental, thank you for sharing, it really helps prepare for what I’m getting into

Jonathan Watt so you are part poet, nice and thank you. The person I rented from that had the warranty did have good A/C companies doing the work but every technician that came to the house all said they would have to replace bits until they could no longer get the bits no matter how bad the thing ran or how many times they had to show up, it’s really a disappointing thought someone would suffer through a hobbling machine.

Terrell Garren all insurance seems to be partly a scam anymore, with them expanding beyond emergencies to covering less emergent issues but not doing it well, I wish there would be more maintenance plans that inspect and catch issues early than cover failure but I guess that is what I have to set up for myself. I was wondering how you found your what I am going to call your “maintenance group”? Was it through trial and error mostly, lots of leads? How do you know when you can trust someone so much that you just allow them to send you a bill? Looking forward to hearing your response and thanks for the replay.

Terrell Garren · Answer

As others have said, it's a scam. A list of trusted contractors is gold. It's taken several years for me to build the list - e.g. electrician, plumber, roofer, HVAC, GC, tree guy, painter, floor guy, etc.  They aren't the cheapest game in town but they do good work and can be trusted. I don't even bother with quotes, just have them handle what needs to be done and send me the bill.

Jonathan W. · Answer

Warranty companies

They offer a certain convenience but

They can be a headache

They can have terrible customer service/communication

They can hire cheap help

And they will deny certain claims or just do temporary fixes

So why do people have them?

Because your paying a monthly premium to avoid having to pay big chunks of change out of pocket when it comes time.

There are companies however that do provide pretty good service and have great technicians they work with. They can be useful

I find them to be a headache and if it takes them time to come out, that’s bad and then if they charge you the service fee but deny the work being needed then your down a service fee plus it’s not repaired plus it took up time and the tenant is unhappy.

Pros and cons

Up to you but I don’t recommend it

Some people do though. It has come through and they use rather pay a small monthly expense then have cash sitting, waiting to pay for problems that arise.

Ben Zimmerman · Answer

An AC/heat system could cost 4k, and last 15 years.  That's 300/year right there.  Do you really think that your home warranty plan at 500/year is going to be able to cover the cost of all appliances and repairs and stay in business?

Insurance is a business, and like every other business their number one job is to make money.  If the insurance company is making money, that means by default you are losing money.

My very first rental I ever bought came with a one year plan.  The AC unit was 18 yrs old and went out within the first month of ownership (Mid July in Phoenix AZ).  It took the insurance company a month and a half to decide that they were only going to replace the one particular part that was broken, and not the unit even though it was 18 yrs old.  The estimate was going to be 800, of which they would only pay 200.  The other 600 was on me because there was the deductible, and they don't cover freon, they don't cover X, they don't cover Y....  They also estimated it would be another 3 weeks before they could get the part and have a technician install it.  So all in all it would have taken over 2 months to repair the AC when my tenant is sweating in the 120 degree desert heat and would only cover 200 bucks of a unit that was destined to fail again within the year.

In the end not only was I stuck with the cost of a new AC unit, I also had to buy a portable window unit in the meantime, and gave my tenant a free month of rent.  I shutter to think what would have happened if he had a heat stroke and sued.  I cancelled my insurance contract, and my property management team had a new AC unit installed the same day, instead of three weeks from now like my insurance company wanted.

Gail Dudlicek · Answer

Think about the cost of an A/C system or a hot water tank.

Gail Dudlicek · Answer

It depends on how available you are to repair and/or replace appliances.

When I work with buyers, I always recommend to make sure the seller includes a home warranty.

When I work with sellers and seller investors -definitely offer one, it takes the scary out of  buyers wanting to make an offer.

As a landlord, I would think that $150-250 +/- per year is worth piece of mind.  Unless you’re  über handy and have cash flow.  Most agreements have a very reasonable deductible.  And if they can’t fix it, they will replace it.  There are several out there that cover the basics, and then you can add on items like a hot tub.

Is a home warranty a good idea / necessary?

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