More turn to home warranties to entice wary buyers

By Bill Lewis For The Tennessean
For home buyers, the last thing they want after their big investment is a big repair bill, so offering home warranties is now a key to sales.

When Zachery and Christina Vinson bought their house, they asked the seller to provide a home warranty so they wouldn't immediately face unexpected out-of-pocket expenses — like the cost of fixing a leaky toilet. / Larry McCormack / The Tennessean
Zachery and Christina Vinson didn’t want to face any unexpected expenses when they bought their first house last month, so they asked the seller to provide a one-year home warranty that will pay to repair or replace any appliances, plumbing fixtures, or the heating and air conditioning system if they break.
They’re glad they did. After closing on their house in Nashville’s Inglewood neighborhood, they discovered that a toilet was leaking. No problem. It was covered.
“It definitely gives us some peace of mind. I didn’t even realize something like that existed,” Zachery says. “Especially after spending a chunk of our savings on the down payment, it’s nice to know we wouldn’t have to pay for a repair.”
Home building companies have traditionally offered warranties on new houses. Now, many individuals hoping to sell an older house are offering warranties as a way to make their property more attractive. The typical 12-month warranty costs about $450. And many buyers are insisting on a warranty that covers replacement or repairs for at least their first year of ownership, says Marcie Sweet, affiliate broker with Keller Williams Realty.
“If they get in and something goes wrong, they only pay the deductible. If the air-conditioning goes out, you’re looking at three grand,” says Sweet, who advised the Vinsons to ask for a warranty.
The Vinsons plan to spend their money and time on do-it-yourself projects such as painting and decorating their new house. Their warranty guarantees they won’t be sidetracked by unexpected repairs.
“It gives us a sense of security. For a lot of things in the house, we wouldn’t have an expense in the first year,” Christina says.
How it works
When homeowners report a problem they can expect to pay a deductible or co-payment of $25 to $125, depending on the terms of the policy, says Whitney Greenway, general manager of Greenway Home Services.
Greenway, which has offices in Donelson and Memphis, makes service calls for American Home Shield, a national home warranty insurance company. Homeowners filing a claim call Greenway, which schedules the service call and contacts the insurer to make sure the problem is covered by the policy.
Warranties typically cover washing machines, clothes dryers, refrigerators, stoves, heating and air-conditioning systems and plumbing, even “a dripping faucet inside,” Greenway says.
“Home warranty companies, over the years they’ve added more to their coverage. They’re so aggressive, they’re adding so much to their plans,” she says.
Plans have caveats
The industry has a good reputation, but anyone buying a house covered by a warranty needs to know how the industry works in order to avoid disappointment, says Kathleen Calligan, president and CEO of the Better Business Bureau in Nashville.
“You need to understand the provisions (of the policy). What does it cover? What does it pay? Do I get to select who comes or, when I call, do they tell me who’s coming” to make a repair, she says.
It’s also important to remember that a home warranty covers items that break or wear out from everyday use. It does not replace homeowners insurance, which covers hazards such as fire.
As a new owner, Zachery says it doesn’t matter to him that he can’t select his own home repair service.
“We haven’t owned a house before, so we don’t have a plumber,” he says.
Even with their limitations, home warranties are more popular than ever, Calligan says.
“It’s almost as much a part of the real estate transaction as the home inspection,” she says.