Home Warrenty for the buyer? good, bad, nuetral?

[Tiny]

TLDR:   How do I tell a good home warranty plan from a so so one or a bad one?   What qualities does a good home warranty plan have?  

I am in the process of buying a house that's habitable and move in ready.  I've never done this before.  I've bought fixer uppers and one uninhabitable house.  I'm alittle frightened by a house in working order AND the cost of buying it coupled with the "expenses of the unexpected" after purchase.

I am stretching a bit to buy this house - as in I won't have much of an 'emergency" fund in place at the start of ownership.   I already have a "financial plan" for the house that includes building up the "emergency fund" to a level I'm comfy with.   It's going into that first year of ownership and all the things that go wrong with a house that I'm worried about (especially having to cover the little things and then possibly the AC dying).  

I've asked the seller for a 3K allowance for the possibly 10 yo A/C (it might be older and have had repairs it might be a bit younger with repairs). the A/C currently works (there is no furnace) and the guesstimate from 2 sources I trust are it will keep running - but it's definitely a 5K expense in the next few years.   This 3K allowance would allow me to keep 3K in an "emergency fund" for the house.    

The seller said no allowance - but they will buy a Home Warranty for me (the buyer).   I'd still be stretching alittle for the house - but the warranty sounds like it would take alittle of the sting out of the A/C dying...   or if some other expensive we can't fix this ourselves thing fails.   I have a family of handymen and women at my disposal to replace toilets or water heaters or do minor electrical stuff.     

If you've read this far - I already own 2 properties.    I will be buying this house -- the 3K isn't a deal breaker.  The stress of the unknown almost is.   The two existing properties are known quantities and have emergency funds.   The new house is an unknown quantity and lets face it Life Happens when you least expect it to.   Do you think a Home Warranty would be useful/relive some of my "omg! unknown expenses!!! omg!!! OMG!! I've never had a house were everything works on day one of ownership OMG!!! " stress?   
 


 

[saveinla]

We were given a home warranty when we bought our apartnment. The AC broke the first week we were in the house. This is in SoCal and we are talking 100 degree temps in late July . Thankfully we paid 50$ for a maintenance visit from the company and they fixed it with no other expense to us.

Check what the plan covers - AC, heater and other common problems with plumbing are usually covered  - sometimes washer & dryer are covered.

Good luck.

BTW - Ours is Fidelity Home Warranty. 

[Cookies Galore]

Sellers buying a home warranty for the buyers is pretty common here. We had one the first and didn't need it. Friends had one and the shit pipes burst in a wall a couple of months after they moved in. The warranty was a good thing to have.

[justme]

Don't get American home shield.

But really home warranties are pretty good about fixing things - they pretty much suck when it comes to replacing anything.

Also if the ac is using R22 freon (the banned stuff - a 10 year old ac has a decent chance of being R22 if it was installed before 2010) most home warranties have very small limits on what they'll pay for so you could be paying $$$ and they won't replace just because you will have to spend $400 in freon to fix it.


That said I'd still say yes to them buying one. And probably research companies and give them two of the better ones as suggestions.

[wvugurl26]

Yeah my boss has been trying to get his AC units replaced under the warranty. They keep fixing them.

[justme]

Since home warranties are 1 year terms (at least all I've seen I think) they're incentivized to just fix it because in less than 12 months they'll either be rid of you or you'll pay them another chunk of money.

They pretty much won't replace as long as they can fix it for less than replacement cost and from what I've read you have no control on what they replace it with - which really sucks if you're wanting different specs. Plus they won't do it fast which can suck if it's an appliance that makes life hell if you don't have it.

[alabamagal]

Well we just went through this since I bought a house today😋. Our house is from 1980s. AC and furnace are 5-10 years old. We paid for a warranty for the house we sold and did not get one for house we bought. It is about $1k. It is just a cash expense part of negotiation. You can purchase one yourself, but I wouldn’t. I would rather have cash in my pocket.

My big thing against them is that they are just a form of insurance. Insurance companies exist to make money. They hire smart people to set rates to make sure they will make money (my son is one of them!). You are better off to self insure. You will find some people who had it cover a repair, but a lot of others who didn’t need it but still felt good about it because they were “protected”. The warranties mostly cover repairs. The cost to replace an item will be discounted based on its depreciated value, so if your ac is 10 yo, it probably has a useful life of 20 years, so if it was totally irreparable you would only get half the cost.

For the house we just owned for 5 years and sold, the AC was 20+ years old when we bought it. We had 3 repairs $800 each in that time. The second one was right before we sold. If we were staying, we would have replaced. The refrigerant will be off market soon. The buyers warranty likely will not cover, his problem.

It is stressful buying a home because of the unknown factor. I have always had older homes (2 from 1970s, current from 1980s). I actually prefer to newer homes. I have had a lot of older AC units, and I have lived in the South. There have been some repairs, and I replaced one unit, but that is part of home ownership.

Good luck!

[thyme4change]

I did not have luck with my home warranty. My dishwasher was leaking and I kept calling them, and they would come out, charge me $50, and say they don't see a leak. They must have come out 4 times - so there is $200. It wasn't until I pulled up the floor, which was wet and nasty underneath was I able to convince them that my dishwasher was leaking. They bought me a new dishwasher that cost $90. It was just a giant dish rack as it was completely incapable of cleaning anything. I kept it about a year, and then went and bought a new dishwasher.

Our pool also had a problem, and they had to come out 3 times before they found the problem - so $150. I would have been much, much better off taking the cost of the warranty and all my service fees and called a decent tradesman, or just buying a new dishwasher the minute I realized it was leaking. Maybe I would have broken even, maybe even spent an extra hundy or so, but it would have been so much less aggravating.

[Tiny]

This is all good info. Since the seller is purchasing this and since this is all mostly jitters on my part. I'm gonna go with it. I'm hoping I get thru the year without having to choose to attempt to use it. (which means I just have the "new to me house expenses" I've got $$ for). In a year I will be able to replace the A/C without blinking an eye. I could replace it now bit it will be annoying/stressfull (and I fear will elicit my other properties (ie karma? fate? the universe having fun with me?) into having expensive repairs out of sympathy).

[buystoys]

The seller purchased a home warranty for us which was useless.  Our septic died the third day we were there and guess what?  Septic systems aren't covered. 

It's a crap shoot from what I've seen.  You may get good service and you may not.

[alabamagal]

I would not even replace an AC unit just to replace it. I believe in running it until it dies. If you do that, over the lifetime of homeownership, you will buy one less AC unit and have $5k more in your pocket.

<says the person who will likely replace a perfectly operational white freezer on top refrigerator (ugly) and 1980s era range with electric elements>

[Tiny]

Thanks for all the advice/opinions. I'm not expecting much from this policy- I've just got first year "new to me" house expense jitters. It's going to be about a $600 expense for the sellers (most likely the realestate agents in this case) - as I don't think the sellers have $$ as they are trying to get out of the house. I may float the idea of just giving me the $600 to hold for expenses. As that's really what I want - to have to borrow less $$ should a big expense occur in the next 12 months.

[thyme4change]

Sept 28, 2019 8:46:51 GMT -5 alabamagal said:

I would not even replace an AC unit just to replace it. I believe in running it until it dies. If you do that, over the lifetime of homeownership, you will buy one less AC unit and have $5k more in your pocket.

<says the person who will likely replace a perfectly operational white freezer on top refrigerator (ugly) and 1980s era range with electric elements>

Maybe. But in the southwest desert, you often get charged more if you need your AC replaced in the peak months. And, the AC is most likely to die at the time you are running it the most, which is when it is hottest. You can burn through that 5k lifetime savings pretty quick if you have to go stay in a hotel for a week while you overpay for a very busy AC guy to get all the parts and workers to get your AC working. Not to mention it just sucks.

Pros-and-cons.

[justme]

Sept 29, 2019 12:03:36 GMT -5 thyme4change said:

Sept 28, 2019 8:46:51 GMT -5 alabamagal said:

I would not even replace an AC unit just to replace it. I believe in running it until it dies. If you do that, over the lifetime of homeownership, you will buy one less AC unit and have $5k more in your pocket.

<says the person who will likely replace a perfectly operational white freezer on top refrigerator (ugly) and 1980s era range with electric elements>

Maybe. But in the southwest desert, you often get charged more if you need your AC replaced in the peak months. And, the AC is most likely to die at the time you are running it the most, which is when it is hottest. You can burn through that 5k lifetime savings pretty quick if you have to go stay in a hotel for a week while you overpay for a very busy AC guy to get all the parts and workers to get your AC working. Not to mention it just sucks.

Pros-and-cons.

All of that. And if you need a non stock ac for some reason it could take even longer. Mine had a leak so it was a guess on how much longer I had with it. But when I was getting quotes one place said it would be 5 wks after I pay a deposit because they have to order it from the manufacturer as they don't keep condo air units in stock.

If that happened in the summer my condo would be over 95 in less than two days. Blech.

[thyme4change]

I also find that sometimes trades people do not work as carefully or throughly if they have 5 other jobs lined up. An A/C guy in February can spend a week making sure all the ductwork is perfect and everything is balanced. In June, maybe not.

[Deleted]

Ours died in the middle of June, which can be hot in Alabama.  It took 2 weeks to get it replaced.  They couldn't even test the furnace, which they also replaced, because they couldn't get the house cool enough for the heat to come on.  The house was over 100.

We only survived because of a window unit in the sunroom.

[AgeOfEnlightenmentSCP]

Home warranties are generally a pretty good idea. They cover wear and tear, mechanical breakdowns, and essentially a lot of things that insurance won't touch and would otherwise be out of pocket. From what I can tell, no one actually performs an underwriting inspection- though, I've seen exclusions for appliances over 10 or 15 years, construction defect-- which is actually pretty common- especially where the roof is concerned- so, you just have to look and make sure there aren't too many exclusions / loopholes.