Buying a home is a complex process. Not only do you have to worry about the initial costs, but there are several other expenses. Some of these are unavoidable, such as making a down payment on the house, while others are optional. A popular optional purchase is a home warranty plan. A home warranty plan is similar to homeowners insurance.
The biggest difference between the two is homeowners insurance protects your physical structure, while a home warranty covers everything inside of your home. If the roof is damaged in a storm, your homeowners insurance covers the cost. If your dishwasher breaks down or your plumbing stops working, you use your home warranty.
Purchasing a Home Warranty
One of the reasons home warranties are so common is the first year is free. Sellers use the home warranty as a way to entice buyers. If they already have an existing home warranty, most companies allow them to transfer it to the new owner, sometimes even restarting the warranty for the new owner.
If it is not initially offered, talk to your real estate agent about bringing it up during negotiations. Getting the first year free is a good way to see whether you enjoy having the warranty. It also gives you an opportunity to budget for a home warranty in the future.
The average cost of a home warranty varies depending on location, as well as the size and estimated value of your home. On average, you can expect to pay between $300 and $600 as of writing. There are also some service fees whenever you use your warranty, but these are typically around $50 to $75.
Like with insurance, there are also more expensive packages that provide greater coverage. There are several providers you can purchase a home warranty from, such as American Home Shield or Liberty Home Guard.
Pros of a Home Warranty
Without a doubt, the biggest benefit of purchasing a home warranty is peace of mind. Many homeowners without a home warranty struggle with utility maintenance, trying to keep a failing system working because getting a replacement costs thousands of dollars. Even smaller appliances often cost several hundred dollars to replace.
With a home warranty, not only do you know you are covered if something does break down, but you are not forced to shop on a budget for a replacement, allowing you to get a new appliance which is more likely to last without needing future repairs.
Cons of a Home Warranty
While home warranties are a great way to cover costs, there is often a wait time while the request processes. The wait time is rarely more than a few days, but with some appliances, you want to get repairs started as quick as possible. As with any insurance plan, there is also the possibility you purchase the warranty and never use it.
Another consideration is home warranties will not cover appliances with preexisting conditions. For example, if the homeowner tells you the air conditioning is breaking down, your home warranty may not apply. This is one of the reasons buyers frequently negotiate for the seller to replace appliances in the home or lower the sales cost to compensate.