Is Home Warranty Worth it?

Question

I currently have a home warranty on my personal home, and have always been un-happy with it. We live in Phoenix and every time the ac unit goes out (every 3-4 years) it takes them at least a week, but usually 2 to have someone come out, look at the unit, then complete paperwork and requests to get a new compressor or parts.

I am dealing with this right now in my personal home, and am hunting for my first investment property right now. Is a home warranty worth it? I can't imagine there is not a better way to do repairs like this. Even if its cutting the warranty off, sticking to manufacture warranties, and saving the cash to pay for expenses when they come up. For a rental, I can see replacing or repairing a unit being deductible as expenses and property improvements.

If I am going to be wealthy someday, I do not want to have to wait two weeks for someone to fix my AC when it goes out in my house, and I do not want this for my renters either. What do you all recommend? What is it that the wealthy do, that I do not know?

Noah Corwick · Answer

Thanks Bruce. I've heard solid things about them. I appreciate the insight.

Dawn P. · Answer

I've found those home warranties to be fairly useless. Keep a decent reserve fund on hand and call your own plumbers/repairmen as needed. Way less hassle and expense.

Charles Carillo · Answer

@Dallin Godfrey

I always suggest that investors and homeowners avoid home warranties.

"the typical home warranty costs $450 annually, and only 25% of premiums are paid to homeowners. The company providing the warranty keeps most premiums as revenue and profit."

https://www.ramseysolutions.co...

https://www.zanderins.com/dave...

Every time I hear about property warranties, it is when something major goes wrong, and the tenants are complaining (rightfully so). The warranty company takes its time accessing the situation, and then they tell you there is a deductible; they will only cover so much; you need to use their preferred company, and it will take three weeks. All the while, the AC is out, and it is July.

It is much better to have a reserve fund and add it monthly. If you know that something major will need replacement in the future, increase the monthly amount you are depositing into your reserve fund. When something goes wrong, you can find the best contractor for the job, who can make the repairs right away, and now your tenants are happy, and you have minimized the time you would have spent speaking to your tenants about the delay or fighting a warranty company.

Jeremy Holden · Answer

Im an agent and investor in Phoenix. I advise my clients to decline a home warranty and focus on beating up sellers during the inspection period. The troubles your are facing with your warranty company are pretty classic regardless of provider. When it comes to investments, you can rely on a third party to control the timeline of repairs since your tenants also have recourse depending on the situation. Always best we control what we can

Peter Mckernan · Answer

Here is my take as everyone seems to align on what is going on with HW companies which is typically a scam over all as it seems lol.

There are about 50% of my investment owners use HWs to cover their issues on their properties. The overwhelming amount of times they do not cover something or decline a lot of what needs to be covered is more often then not. For example, I just had a client that I help manage his property that needed a new AC condenser. The HW company was still active on the property, and they sent their preferred AC company out there. The HW company confirmed what the findings were from another AC company that stated the condenser needed to be replaced. The HW company stated that there would be a small cost to cover from my owner, and it would be permits and other small fees.

1. The permits and fees were $4950.00 (condenser from other company with install $7,000-$7,500).

2. The HW company would not let the owner or PMC see their report/estimate. When asked to provide it to see what they were covering they stated that is not allowed/against company policy.

This was still a savings; however, the owner was on the hook for still a total of $2K-$2,500 for all items included. We have also had HW companies show they are not going to cover any of the AC items at all due to the use not falling within protocol for them. There are stories like this and many more for reasons not to use them at all.

Emma Atanasoska · Answer

It really depends on the company you go with. I’ve had mixed experiences in the past, but recently I was pleasantly surprised. My A/C went out, and the total repair was around $ 1,200. They covered about $800, and I just paid the rest plus the service fee. What made a big difference was being able to choose my own technician, which made the process much smoother and faster.

I’d say a home warranty can be worth it, especially for older systems or appliances—but the key is picking a company that is responsive and allows some flexibility with vendors.

Noah Corwick · Answer

Hi Bruce. If you don't mind me asking, which home warranty company do you use?

Bruce Woodruff · Answer

It depends on which company you are with. I have had bad experiences in the past and swore I'd never get one again...but my new residence came with one (bought by the Seller's agent). Shortly after moving in, this house (built in 2006 so 18 yrs old) styarted having issues - cooktop working erratically, they replaced it with a high-end (GE Profile) new one.....Dishwasher started leaking, replaced with brand new GE Profile. 50 Gal water heater went out (elements) they replaced.

So in just 6 months, they have spent about $5000 on me. I was so impressed that I did what I never thought I'd do.....I renewed the policy. Both of the AC condensers are 18 yrs old, and they'll be $4-5k each when they go.

So after this experience, I'd say definitely go with a GOOD company. YEs, with a rental, they may be a bit slower, but you have the option to fix things yourself and they will reimburse you.

Is Home Warranty Worth it?

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