|A home warranty helps prevent the
dreaded money pit syndrome
you buy a pre-owned house the last thing you need is for your dream
home to turn into a money pit. Appliances, heating, plumbing and
electrical systems have an uncanny ability to break down shortly
after new owners move in.
The key to keeping these problems from sucking up
the little you have left in your bank account is a home warranty.
This type of warranty doesn't cover structural problems
such as a leaky roof but it will cover most major mechanical systems
and built-in appliances -- things that generally aren't covered
in a homeowners policy.
Real estate broker Rosemary Chiaverini of RE/MAX in
O'Fallon, Ill., says many home buyers don't get a home warranty
unless the house is 10 years or older, but she recommends one for
any house that's more than 3 years old.
"The buyer has two options," says Chiaverini. "They
can request that the seller pay for coverage and try to negotiate
that or the buyer can purchase a contract that begins after closing."
homes often sell faster
The best situation, of course, is that the seller has already purchased
a warranty. Many do because it can help sell the home more quickly.
Chiaverini says sellers who purchase a one-year warranty often get
coverage during the listing period for free with the actual one-year
period not kicking in until after closing. But sellers may not want
to spend the money if they're confident nothing will break down.
In that case, the buyer will have to decide whether a policy is
Annual coverage runs about $350 to $400 with a fee
of $50 to $100 per item, per service call. The annual rate goes
up if you want to cover things such as a pool or spa. Chiaverini
says even a washer or dryer may not be covered in a basic policy
because they're not considered items that normally are included
in the sale.
It's extremely important to read the policy carefully -- especially
if you're the buyer and the policy was purchased by the seller.
A basic home warranty may not cover the heating and air conditioning
in a seller's policy, but would cover those systems in a buyer's
policy. Make sure you know exactly what's covered.
Buyers and sellers can get home warranty contracts
from their real estate agent. Chiaverini says her office generally
has contracts from a half-dozen companies and they may vary in types
of coverage and limitations.
"Consider the home you're buying when weighing the
advantages of one plan over another. If you have a plan that's strict
on water heaters and you know yours is old -- you can't see the
rust but you know it's old -- get a plan that covers water heaters."
Speaking of rust, most plans don't cover rust or corrosion
-- that's to protect the issuer from pre-existing conditions. There
is often a waiting period that can be 30 days or more, although
some plans let you begin coverage immediately. If your house is
on a slab, more than likely any plumbing in that slab won't be covered.
Likewise, if there's a problem between the house and the sewer system,
for example, that may not be covered. Inspections generally aren't
required but you may be asked to sign something that says, to the
best of your knowledge, all systems that are covered are in good
-- Posted: Feb. 14, 2000