When Do I Sign Up for My Home Warranty?

Home warranties typically warrant such things as electricity, plumbing, heating and major appliances.

Home warranties are commonly associated with home purchases. When selling a house, some sellers purchase home warranties for their buyers or the buyer himself pays for the warranty. A home warranty helps pay for repairs for specific defects occurring after the close of escrow. Home warranty policies vary in price and protection. For the best price, sign up for your home warranty before you close escrow.

Home Warranty Definition

A home warrant is an insurance plan for your house; it is not homeowner insurance, which covers such situations as fire or theft. Home warranties insures the mechanics of a home, such as a stove that goes out or plumbing problems. One reason sellers offer home warranties is because if something should break down the first year after buying the house, the buyer has someone to turn to, other than the seller, for the repairs.

Terms of the Home Warranty

Home warranty policies are typically for one year. Like all insurance policies, one policy might offer more coverage than another policy. When selecting a home warranty, read through the different policies to determine what is actually covered. Some policies may require an additional fee to cover appliances, the swimming pool or roof. Another consideration is the fee for service calls. Home warranties typically charge a flat service fee, such as $35 or $50 for the initial service call, yet will pay for the covered repair. When deciding a policy, consider the coverage as well as the service fee.

Purchasing the Home Warranty

If buying a house and ordering a home warranty, sign up before you close escrow. If the seller buys the home warranty, the seller or seller's agent will order the home warranty. Or your contract may specify that you have the option of selecting the home warranty yourself. Ask your real estate agent or title company for information on local home warranty companies. Normally, the title company can provide you with information on home warranty companies serving your area. Often you order your home warranty by giving escrow instructions to the escrow officer, who then orders and takes the proceeds out of escrow to pay for the policy.

Renewing Your Policy

You don't have to buy a house to get a home warranty policy. Some property owners opt to renew their policy when it expires at the end of the year. Other property owners decide to purchase a home warranty to cover potential repairs that might occur in the upcoming year. When ordering a home warranty policy, contact the home warranty company of your choice and ask to speak to a sales representative, or contact the sales representative of your existing policy. If you need to locate a home warranty company, contact a local real estate agent or escrow officer for a list of home warranty companies and contact numbers. Home warranty policy rates tend to be lower when purchased for a house during escrow, than for a renewal or new policy for an existing home.

Pre-Existing

Home warranty policies do not cover pre-existing defects. For example, if during the inspection period you discover the air conditioner is not working, do not expect the home warranty to pay for the repairs after escrow closes. If your water heater goes out, don't assume you can purchase a home warranty and it will pay for the water heater. Purchase your home warrant before something breaks.

References

• "Modern Real Estate Practice"; Galaty, Allaway and Kyle; 2006

Resources

• American Home Shield