Home Warranty Pros and Cons

Home warranties have their upsides and downsides, just like many other insurance plans. And, these are generally purchased by sellers to help attract buyers. But, what exactly are home warranties and what pros and cons can buyers expect to find? These are good questions, particularly if you are a first-time homebuyer.

Home Warranties Explained

Although the name strongly implies a home warranty provides coverage for a property, it’s somewhat misleading. A home warranty actually covers things in your home. These include central air and heat, washing machines, clothes dryer, and garbage disposals. Pus, electrical wiring. Furthermore, water heaters, stoves and ovens, plumbing, garage door openers, dishwashers, refrigerators, built-in microwaves, smoke detectors, and ceiling fans.

“Whether you are buying your first home or selling a home and moving into another, a home warranty could be a valuable protection for your finances and your peace of mind. Many buyers opt to purchase home warranties, which average $350 to $500 for a basic warranty and $100 to $300 more for a warranty with extra protection. Buyers, particularly first-time buyers, like the fact that they can rely on a warranty to pay for repairs during the first year while they are settling into a new home.” —Realtor.com

The cost of a home warranty is generally and relatively inexpensive. Most cost between $350 to $500 per year. It’s also possible to purchase what’s known as “enhanced coverage.” Enhanced coverage costs $100 to $300 per year extra. For this, homeowners get a little more peace of mind. However, this doesn’t means home warranties are always worthwhile.

Home Warranty Pros and Cons

Sure, a home warranty can save you a lot of money. That is, if you’re buying a home that will need a new central air and heat system. But, home warranties do have their drawbacks, which include the following:

  • Repair and service call fees aren’t included. Even though the home warranty might cover the cost of replacement, it probably won’t include service call repair fees. That means you’ll have to pay the $50 to $75 service call repair fee. But, that’s not all. If it’s a repair and not a replacement, you’ll have to pay for labor and parts. Even if it’s a replacement, you still might be on the hook for installation fees.
  • Home appliances rarely breakdown. It’s understandable new homeowners don’t want to incur any additional expenses. After all, you’ve just taken out a big home loan and paid for closing costs. Not to mention the fact you’ve also paid for all those inspections. But the truth is, home appliances rarely break down. In fact, statistically, only 1 out of 5 homeowners experience appliance breakdown within the first three years.
  • Poor ROI. If you do elect to buy a home warranty, you’ll pay as much as $450 to $800 per year for enhanced coverage. Now, take that expenditure and put it aside. In other words, if you save just $700 per year for three years, you’d have enough cash on-hand to pay for a replacement appliance (or two) out-of-pocket.
  • Other coverage might apply. New appliances typically come with a one-year manufacturer’s warranty. That’s sufficient and redundant if you buy a home warranty. And, if you buy a new construction home, the builder probably also provides some warranties of their own. So, you might have other options available and that means the home warranty is an unwarranted expense.
  • Not everything is covered. Read the entire policy and all of its disclaimers. You’ll likely find that not everything is covered. While certain things will be covered by the policy, there are usually others that will cost you out-of-pocket.

If you are considering buying or selling a home in Orlando, contact us for the latest market information. We’ll also provide you with the right advice about the local real estate market so you make the best decisions.