Need a home warranty? Probably not
Gregory Karp | Spending Smart
November 18, 2007
Home warranties are a hot topic, as many home sellers offer the additional peace of mind to attract buyers. But many homeowners are asking, ”Should I buy a home warranty for myself?”
Home warranties, or service contracts, are different from homeowner’s insurance, which provides hazard and liability protection. A home warranty is a service contract for an existing home that covers the breakdown of its major operating systems, such as a furnace, and major built-in appliances, such as a dishwasher. The homeowner buys the one-year service contract for $300 to $500 and pays a service charge, often less than $100, for each call.
These warranties are most common in home-sale transactions. In general, it’s a good idea for home sellers to pay for a home warranty as a marketing tool to attract buyers in a slow market, said Ilyce Glink, author of ”100 Questions Every First-Time Home Buyer Should Ask” and editor of the real estate Web site ThinkGlink.com.
A service contract allays buyers’ fears that they’ll be stuck with a big repair bill as soon as they move in–if the stove and air-conditioning system break down, for example. In California, where it seems most real estate trends begin, home warranties are standard, with about 90 percent of existing-home sales including one, according to the Home Warranty Association of California.
”Of all the perks you’re going to offer, this is a cheap one,” Glink said.
On the other side of the transaction, savvy home buyers should ask for a home warranty. An eager seller is likely to throw it in for free.
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