warranties: Good or good-for-nothing?|
What's your home warranty really worth? That depends
on the language in the contract and who is standing behind it.
There are two basic types of home warranties.
- With a new home, many builders
will offer a warranty on the home, usually for about 10 years, to cover the structure.
Some builders provide their own warranties; others contract with third-party companies.
In either case, the warranty spells out what is covered and outlines a procedure
for requesting repairs if something goes wrong.
- On an existing
home, a buyer or seller can purchase a one-year warranty that works almost like
an extended service contract. The warranty usually costs $350 to $600 and covers
just the electrical and mechanical components of the house, such as the furnace,
appliances and air conditioning. If something isn't working, the homeowner calls
the warranty company, which dispatches a local contractor. The homeowner pays
a minimal fee. If the repair falls under the scope of the warranty, that's the
only cost the homeowner has to pay.
Ron Phipps, broker with
Phipps Realty in Warwick, R.I., sees one-year warranties as a good value for both
buyers and sellers. "The reality is that almost all houses have issues that
come up after closing," he says. "For a $35 to $50 service call, it's
most advantageous to the buyer to know that someone's taking care of it."
If he wasn't already sold, one incident last year would have
convinced him. Two months after one closing, the home's heating system, dishwasher
and hot-water heater all broke down. Since the seller had purchased a one-year
home warranty contract, the buyer was covered.
was nice was that the seller didn't even hear about it," says Phipps.
warranty is not necessarily blanket protection. And what is actually covered and
what a homeowner believes is covered could be very different things.
instance, a one-year warranty on an existing home may cover problems with the
hot-water heater. But it may not cover anything caused by rust or poor maintenance.
So if the water heater gives out and the repairman finds rust, you might have
to pay the bill yourself.
The key: Read the contract to know
exactly what it covers and for how long, what you have to do to make a claim,
and what deadlines, if any, you'll face.
With a new home, "The warranty is only as good
as the builder," says Janet Ahmad, president of HomeOwners for Better Building,
an organization that promotes good home building and consumer-friendly legislation.
"There are some good builders who stand behind what they build."
extended protection," says David Crump, director of legal research for the
National Association of Home Builders and co-author of "Warranties for Builders
"A good warranty provides peace
of mind. It provides a means of correcting any flaws or defects in construction
that otherwise would be the purchaser's sole responsibility."
most important thing you can do with a home warranty is read it. Before the closing,
take a close look at the contract. What does it cover? What does it exclude? How
long will the home be covered? What is the procedure if you have a repair problem?
What is the timetable for making repairs? What rights, if any, do you give up
by signing on the dotted line?
Buyers should "look at
the claims procedure and make sure it's something they understand," says
Crump. "They should read this and understand how it works -- it's the basis
of making their claim."