What Does a Home Warranty Cover?

Silicon Valley Real Estate Podcast with John Fagan

If you’re looking to buy a home here in Silicon Valley, you may be wondering whether you need a home warranty to protect it against potential problems. Today I’d like to answer some common questions about home warranties:

1. What is a home warranty? In essence, a home warranty is an insurance policy that protects your home from issues with things like the plumbing, electrical wiring, or appliances after you move in. Even if no problems were spotted during your initial inspection, complications can crop up unexpectedly.

2. How long do home warranties last? Home warranties will generally last one year.

3. How much do home warranties cost? Basic home warranties usually run between $400 and $500. This cost can vary depending on what you’d like to have covered.

4. Who pays for the home warranty? Typically, we can get the seller to pay for the cost of the home warranty as part of our offer; however, if you’re competing with multiple offers on a property, sometimes it’s best not to include it, as the seller is going to look at the total net proceeds of your offer and take that into consideration.

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Potential problems with your home can come up unexpectedly.

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It’s important to note that home warranties are not catch-all insurance policies that will completely cover everything. There will usually be a service fee attached to a claim, which can run anywhere from $60 to $90 per incident. The warranty company will send contractors out to fix any problems, but you will be charged for each incident reported. While a home warranty provides some nice peace of mind for new homeowners, they are not the perfect solution to every problem you may encounter.

I’ve learned this from my own personal experience. My water heater had gone out on my property, and though I was covered by a home warranty, codes had changed between then and the time the house was built. So while the installation and the new water heater were covered, the code upgrades were not. Though I ended up spending about $400 on that, I did end up saving nearly $1,000 on the water heater itself, thanks to the warranty.

If you have any specific questions about home warranties, companies that provide them, or different types of coverages, give me a call or send me an email. I’d be happy to talk you through it.