Home Warranties Are They Worth The Cost?

warrantyA home warranty, or a home protection plan, is a one-year service contract that covers the repair or replacement of home system components and appliances that may break down.  A home warranty can protect a property owner from unexpected costs associated with covered breakdowns, give access to the network of contractors, and make requesting service easy.   There are service plans that include:

  • Home systems (i.e., central heating ventilation air conditioning – HVAC systems, hot water heaters, plumbing and more)
  • Appliances (i.e., refrigerators, stoves ovens, washing machines, dryers, etc.)
  • Combo (coverage of both systems and appliances)
  • Plus optional add-ons (Such as swimming pools, spas, well pumps and more)A home warranty cost approximately $500.  In addition to the annual fee, you’ll need to pay $60-$75 as a service fee once the contractor has been dispatched to your home.

At Metro Property Management, we are often asked if a home warranty is worth buying.  My whimsical answer is, “NO, it’s like all insurance, a waste of money, until it is needed.”  However, before answering that question, let’s state the facts. With the world of home electronics evolving by the day, future technology is expected to last beyond the extended warranty.  Even most of today’s appliances boast reliability, making the price of most extended warranties almost equal to the amount paid for repairs.  In addition, most products don’t require repairs two or three years after the manufacturer’s warranty expires, and the home warranty is in effect.  If they do, the repairs won’t cost much.  With most defects revealing themselves during the first year of use, chances are that you won’t need more than the manufacturer’s warranty. However, if you want to be on the safe side and get a service plan, make sure that the cost of the warranty doesn’t exceed 10% of the appliance’s price. Another approach is to purchase extended warranties for items that are too difficult to repair or too expensive to replace.

By getting this type of a warranty, you can easily connect with the service plan call center, which will promptly send through the right repairperson.  However, because service providers pay for leads, they may try to make up for their lost profit through up-selling a service or more expensive repairs.

Access to call center isn’t a benefit to an owner using a property management company.  At Metro Property Management, we are the tenant’s primary contact for maintenance and emergency repairs.  We don’t just send out a repair person, and bill the owner.  We investigate all maintenance requests before we hire the contractor.  Furthermore, because of the volume of business, we can give contractors they give us discounted rates, and we pass the savings on to the owners.  We only use licensed, bonded and insured contractors, and we don’t add a mark-up fee to any standard maintenance or repairs work.

If you don’t have a property manager, a home warranty may make sense.  However, you will still need to personally address the tenant’s maintenance complaints, supervise the contractor’s work and in addition to the initial cost of the insurance absorb the costs of the service calls.