A Home Warranty Can Be a Great Safety Net for First-Time Home Buyers

This post comes from Mike Nickele at our partner site Zing!

First-time home buyers have enough to worry about, like finding the right house for the right price, coming up with a sensible down payment and securing a mortgage. After putting down a hefty sum for the purchase, many first-timers may not have the extra cash on hand for major fails like the furnace, the air conditioner or kitchen and laundry appliances; a home warranty can be a good fix. What’s a home warranty? How does it work and what does it cover? Let’s find out!

What Is a Home Warranty?

Let’s start with the basics. A home warranty is a home protection plan that helps cover any unexpected repairs. And, since many first-time buyers may not have a lot of experience maintaining a home, it’s a pretty good idea.

How Does a Home Warranty Work?

If/when something breaks down, you call your home warranty provider and make a report. They’ll get in touch with a third-party contractor with whom they have a business arrangement, and that contractor will contact you to schedule an appointment. The repair or replacement will be paid for by the warranty provider, however, you will have to pay a trade service fee that can range from $75 to $125.

What Does a Home Warranty Cover?

Each warranty and/or warranty provider is different, but typically these things are covered:

  • Systems: air conditioning, heating, electrical, plumbing, water heater, garbage disposal, central vacuum
  • Appliances: refrigerators, dishwashers, dryers, washers, range/oven/cooktop, built-in microwave oven, ice maker, trash compactor, garage door opener, built-in processors

How Much Does a Home Warranty Cost?

Sounds like another expense, but it can be well worth the price, which will range from about $200–$600 per year, depending on how comprehensive the policy is.

How Do I Get One?

First off, ask the seller if they are offering one as a sales incentive. If not, ask your real estate agent if he/she offers one. If they don’t offer one, you should ask for one. If they want the sale bad enough, they might spring for the first year of coverage.

You also have the option to purchase one on your own from a home warranty provider. If you’re buying a new construction home, the warranty may already be included in the sales agreement. While new construction reduces the chance that you will need the warranty, it will provide some extra peace of mind.

What Can Go Wrong?

There are a few cases where coverage for a repair or replacement can be denied. Some include

  • Lack of maintenance
  • Improper installation
  • Code violation
  • Excessive wear and tear
  • Pre-existing conditions
  • Appliance or system is not included in the policy

How Do I Find a Home Warranty Provider?

Check out HomeWarrantyReview.com. It lists a number of national and local companies, as well as reviews for you to compare providers.

Home Warranty = Peace of Mind

As a first-time homeowner, you’ll find the experience very rewarding, and maybe sometimes a little scary. A home warranty can ease your mind when it comes to impending expensive home repairs.

Do you have a home warranty? Do you think it’s worth the cost of the policy? Which company provides your policy? Are you satisfied with the coverage and service? Tell us all about it in the comment section below!

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2 Responses to “A Home Warranty Can Be a Great Safety Net for First-Time Home Buyers”

  1. Anonymous

    Is this really worth it thought? I normally avoid warranties like the plague and it’s paid off for me. Anything that is a warranty almost always gets a flat “no.”

    Jay

  2. Anonymous

    I normally avoid extended warranties like the useless plague-ridden corporate profit centers they are. But in the case of our home I don’t want to mess around. I’ve found that it helps to think of this as akin to insurance, and we found a tremendous peace of mind when we maxed out our homeowner’s and collision coverage for only a few dollars more, and have a similar peace of mind with our home warranty. Of course it’s not a magic fix for everything, but it has been generally more useful than not.

    It wasn’t always like this though. When we bought our home (built in 1978) six years ago the first year warranty was included in the sale. We chose to pay for the next three years. I was about ready to cancel it because we had spent far more on it than we had used in actual repairs. It seemed like a waste and we would be better off putting that money into a repair fund ourselves.

    Then our A/C went out, in the middle of summer in the deep South, and the repairs and replacements cost about $2,500. We had paid roughly $1,800 into the warranty at that point, so we came out ahead in that deal. Our total out of pocket cost was $75.

    Of course, it took three or four days to get it resolved, and we had to fire the first repair company that came out and demand a replacement, but all in all it worked out well for us in the end. Overall the experience has been positive.

    That said, I can’t see maintaining it forever. There has to be a point of diminishing returns. The trick is knowing when to cut it off and self-insure for expected repairs.

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