Home Warranties
Plans Offer Peace of Mind for Both Buyers and Sellers
The Kansas City Star, Kansas City
March 28, 2004
By: SU BACON
After months of looking for a house in southern Platte County last year, Linda Vestal finally found one near Park University, where she works. The house had a lot going for it. It was tucked away on a quiet cul-de-sac overlooking a lake. The garage was next to the kitchen, making it convenient for unloading groceries. It was structurally sound. And it was in her price range. The only hitch was that the house wasn't clean and didn't appear well maintained." The place needed new paint and cosmetic work," Vestal said. So when Vestal made an offer to buy the house, she asked that the seller purchase a home warranty as part of the negotiations.
This annual service contract would cover repairs and replacements of major appliances and household systems. In the Kansas City area, home warranties sell for about $400.The seller agreed, and Vestal bought the house. Without the warranty, Vestal said, there would have been no sale.! "I was sinking everything into buying the house," she said. "I couldn't afford a major expense once I moved in."
Typically, home warranties cover heating, air conditioning and electrical systems, plumbing, the water heater and major appliances when they break down because of normal wear and tear. Like Vestal, Annette Mitchell asked that the seller include a home warranty on the house she bought in Gladstone last July. When October ushered in frosty autumn mornings, Mitchell discovered that the automatic igniter switch on the furnace didn't work. "The first thing I did was to call the home warranty company,'' Mitchell said. The company contacted one of its service providers, and a repairman made two trips to Mitchell's house to determine the problem and order parts. The total cost for the labor and parts was $278. Mitchell's share was $50.
Homeowners are required to pay a flat fee for service, which is applied to the cost of repairs or re! placement, similar to a co-pay at a doctor's office. Deductibles or co -pays in the Kansas City area average $45 to $75. Patrick Becker bought a home warranty himself for $360 when he purchased a house near the Country Club Plaza in 2002. In the first year, the warranty covered repairs on the heating and electrical systems and replaced the garbage disposal and the range. He paid a $50 deductible for each service call. Becker became a real estate agent for ReMax of Kansas City this year and now encourages buyers and sellers to get home warranties. “For the seller, a home warranty is peace of mind,'' Becker said. "If something goes wrong after the sale, the buyer can call the home warranty company. "From a buyer's perspective, a house for sale that is under warranty creates a better impression than one without a service contract. "A home warranty is a necessity for a buyer's first year,'' said Beth McKern, a ReMax real estate agent. "If something is going to go wrong, it will go wrong in the first year. "When a! lot of things go wrong that first year, however, the home warranty company may not renew the policy. But homeowners can often find another company that will sell them a warranty, McKern said.
Just how do you find a home warranty company? Well, you don't look in the telephone directory. They're not there under Home Warranty or Whole-House Service Contracts or any similar listing. "The companies rely on real estate and finance companies for their business," McKern said. In most cases, you don't need to be buying or selling a house to purchase a home warranty. Most companies sell them to owners of existing homes as well. Real estate offices have lists of home warranty companies they do business with, and they often have sample service contracts as well. McKern recommends that consumers read the fine print and compare several. Coverage can vary. One company may include roof repairs or ductwork, for example. One may make built-in appliances part of! the standard coverage but charge extra for freestanding appliances. Most of the companies have a toll-free telephone number that warranty holders call when something breaks down. The company then contacts a service provider in the homeowner's area, and the repair company makes arrangements with the homeowner for the service call. An exception to this is the A.B. May Co. in the Kansas City area. The company provides both the home warranty and the service. "We are staffed seven days a week," said Glen Posladek, company president. "There is no middleman."
Home warranties can mean substantial savings to homeowners. Plumbing repairs, for example, can cost an average of $100 to $1,200, and replacing a refrigerator ranges from $525 to $2,100, said Julie Redders, director of marketing for HSA Home Warranty in Madison, Wis. But while a home warranty can be a financial lifesaver, it isn't a panacea for years of neglect or shoddy workmanship. Most warranties exclude breakdowns caused by rust, corrosion, mold, code violation! s or improper installation.
In Kansas and Missouri, the home warranty industry is regulated by the states' consumer protection acts, said Art J. Chartrand, spokesman for the National Home Service Contract Association, which was established this month in Olathe. The warranties or home service contracts are not insurance products, he said. They won't pay you when something [is damaged from a peril normally covered by insurance.] Home warranties provide assurance because the company has already screened local service providers, and they offer convenience because there's just one phone number to call - the home warranty company. Chartrand said the National Home Service Contract Association planned to post consumer information on its Web site (www.homeservicecontract.org) in the next 60 days when the site is up.
Consider this. How long has the home warranty company been in business? Does the company employ its own repair and maintenance crew? Or does the company contract with third-party service providers? Are you allowed to use other service providers with the warranty company's approval? What is covered? What is excluded? For an additional cost, can you add items to the coverage? If you need to replace an item, can you pay the difference for an upgrade rather than replace it with one of the same quality? What are the dollar limits for repairs and replacements on each item? Is there an annual limit on the warranty? Are there any other limits, such as square footage or age of the house, systems or appliances? What does it cost to renew the warranty? Will the company refuse to renew because you have filed claims?
Here are some of the companies offering home warranties in the Kansas City area:
A.B. May Co.
www.abmay.com (913) 383-2222
New homebuyers: $399 with a $60 co-pay
Owners of existing homes: $485 with a $50 co-pay
American Home Shield
www.americanhomeshield.com
For real estate transaction: (800) 735-4663
New homebuyers: $395 with a $60 co-pay
For an owner of an existing home:(800) 247-4749
Existing homeowners: $324 with a $45 co-pay
First American Home Warranty
www.firstam.com/warranty (800) 444-9030
Purchased during a real estate transaction:$370 with a $50 co-pay
Purchased otherwise: $395 with a $50 co-pay
HSA Home Warranty
www.onlinehsa.com (800) 367-1448
For newly purchased and existing homes: $399 with a $75 co-pay
Old Republic Home Protection Co. Inc.
www.orhp.com (800) 445-6999
New homebuyers: $360 with a $55 co-pay
Warranties available only during real estate transactions.
2-10 Home Buyers Warranty/America's Choice
www.2-10.com (800) 795-959
www.hometrustwarranty.com
New homebuyers only:2-10 warranty: $389 with a $55 co-p! ay
Home Trust warranty: $399 with a $60 co-pay
Both warranties are available only during real estate transactions.
They are not available to owners of existing homes.
Owners selling homes themselves also may purchase a warranty. To find other companies that offer home warranties, ask your real estate agent or search the Internet by typing in Home Warranties on a search engine. The Web site www.homewarrantyexperts.com also is useful.