If you’re buying or selling a home, it’s a good idea to consider a home warranty—just make sure you understand the pros and cons of it.

When I bought my first home, it was a recently renovated condominium.  All of the appliances were less than a year old and in the nearly 8 years I lived there, I never had a problem with them.  My second home, however, was a different story.  A single family, multi-level fixer upper with a few (very few) updates and at least one appliance older than I was.  Fortunately, my new husband was (and still is) a fairly skilled handyman; nevertheless, phone calls to local repairmen were far from unusual.

So when we bought the home we live in now, we opted to purchase a home warranty.   And I’ve got to tell you, I’m glad we paid the $250 price for that warranty.

The first summer brought 100 degree heat and, as luck would have it, our air conditioning went on hiatus.  We called the warranty company who sent a local HVAC repairman.  With a look of surprise on his face, he told us that he had actually been the one to install the central heating and cooling system…more than 30 years before.   After evaluating the system from top to bottom, he also let us know that, while it had lasted longer than he could have anticipated, it was on its last legs and appeared to have been serviced a number of times before in an effort to keep it going.

Because the HVAC system was covered by our home warranty, we ended up paying less than a third of what it would have normally cost us to replace it.

So are home warranties worth the cost?  It depends.

 The pros of home warranties:

  1. Peace of mind.  If you’re buying a home that’s more than a few years old or if you’re buying a foreclosed property, you’d be nuts not to wonder about how soon you’ll have to start replacing things.  A comprehensive home warranty can alleviate some of those concerns and give you peace of mind.
  1. Savings that outweigh the cost.  As we learned, a relatively small investment in a home warranty saved us a lot of money in the long run if a major system goes down.
  1. Improved selling opportunities.  If you’re selling your home, offering to pay for a one- or two-year home warranty as part of the closing transaction can lead people to choose your property over another one they’re considering.

The cons of home warranties:

  1. 1.       Paying money that you never get back.  A home warranty, like any insurance policy, only pays off if there’s a problem.  If you pay for a home warranty and nothing ever happens, you lose the money you invested.
  1. 2.       Limited coverage.  Home warranties don’t cover every problem that will occur in your home.   You may get a bad surprise if you think it covers something that it doesn’t, or pays far less for a repair that you were anticipating. 
  1. 3.       You might already be covered.  If your home is new construction, many of the appliances and systems in it should be covered by the developer who built it.  As such, no additional coverage may be necessary.

 So the short story is this:  if you’re buying or selling a home, it’s a good idea to consider a home warranty.  Just make sure you read it carefully and understand both its potential benefits and potential downfalls.

Want more information about home warranties?  This Angie’s List article is a great place to start.

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