Home warranty companies, like all businesses, can come and go. When clients ask me about which one to choose, I suggest some companies which have been around for a while. Getting a cheap home warranty from a company that goes out of business six months later will not be helpful.
There are probably 6 to 7 home warranty companies which offer policies in California. The four listed below are all reputable and I am unfamiliar with others that I see listed on various websites, so I am not mentioning them here. Interestingly, three of the ones with staying power that I know are affiliated with title companies.
- American Home Shield Corporation AmericanHomeShield.com
- Fidelity National Home Warranty Company HomeWarranty.com
- First American Home Buyers Protection HomeWarranty.FirstAm.com
- Old Republic Home Protection Company, Inc. – link to pdf brochure ORHP.com
Some things to consider or be aware of:
(1) Several of these home warranty companies may be owned by the same firm
(2) I myself have had a very good experience with Old Republic Home Protection so recommend them but do suggest you do your own research!
(3) Ask your friends, neighbors, and folks you know who’ve recently bought or sold homes about their experience with their home warranty company. Eighty percent of homes sold in California do include a home protection plan, so they may well have some input for you which would be valuable.
(4) If you have any other tips for evaluating home warranty companies, please share them with me!
What does a home warranty cost?
There are two main types of coverage, Sellers and Buyers. For both of them, there are a couple of costs: purchase and when an event happens that requires a service call.
First, there’s a cost to purchase the home warranty. Most of these companies, maybe all, have additional fees to add air conditioning, refrigerators, pools, etc. Often the basic cost is about $300 – $500, but it will be more if the house is large or if you add various types of additional coverage.
Then, there’s the cost of the service call (when a tradesperson comes to address whatever is wrong). Frequently it’s between $70 and $90, but do ask or check online for the exact fees.
Finally, like with all kinds of insurance, there are limitations and exclusions. A furnace may be covered in full with one policy, but may be limited to a dollar amount with another.
Sellers Coverage : Home warranties can be purchased for the escrow period (when the home is “listed” or “under contract”). This is called Seller’s Coverage (the seller still owns the home). The cost is usually minimal – pennies a day – but the coverage is normally not as extensive as buyer’s coverage (for after escrow is closed). But it can help a great deal if you have it in place when the inspections are done and the seller is surprised to learn about problems with the furnace, plumbing, etc. Here’s an example from my own experience. During inspections, let’s say it’s discovered that the furnace has a cracked heat exchanger. This is a bad surprise for the seller, as it costs about $1500 to replace the furnace, and it must be done (as a cracked heat exchanger can cause carbon monoxide poisoning). During the seller’s coverage period (once the home is listed and the agent or seller has ordered the coverage – whether it’s pre-sale inspections or the inspections done once the home is in contract or is sales pending), many home warranties will cover $500 of this cost. The cost to purchase the seller’s coverage is probably about $65 for a typical escrow period. So it provides good peace of mind for the “what ifs” of the inspections. It may not cover everything, but the seller will have saved money by having the warranty if something like this is discovered. (For this reason, I provide a seller’s coverage on a home warranty with ALL my listings. If I can help soften any unpleasant surprises, so much the better.)
Buyers Coverage : The cost to provide a Buyer’s Warranty runs from $300 – $500 for a typical house, depending on the type and size of home (condo vs single family dwelling, the amount of square footage) and the amenities covered (it usually costs more to include air conditioning, a hot tub, etc.). It lasts for a year, from the time the home warranty company is paid (or close of escrow, check each company to verify). There are many possible “add ons” – some of which might be a very good idea for you to consider purchasing! If that cracked heat exchanger discovery is made during the buyer’s coverage, the home warranty company may cover all of it.
On average in the US, for every home warranty purchased, there are between 1.7 and 2 service calls made – so homeowners with these warranties are making good use of them!
With new construction, or extensive remodeling, the home warranty may not be as useful (since many items will have a manufacturer’s warranty), but for older homes the home warranty could save you a bundle on repairs.
How Comprehensive Is Your Home Warranty?
Check your home warranty policy to see which of the following items are covered. Also check to see if the policy covers the full replacement cost of an item.
An important issue to consider if you are buying an OLDER home is whether code compliance will be covered. For instance, if a water heater was placed in a very tiny closet and it needs replacing, it will then need to go up on an 18″ platform and be properly strapped etc. Many home warranties cover part of this job, but will not cover bringing it up to code. Some offer an add-on to the basic policy that includes code compliance. I highly recommend this for homes that are more than 30 or 40 years old! It may be called something like “Premium Coverage”.
What’s Included? Check On These (for starters) . . .
As a general rule of thumb, items beyond the foundation walls are often not included (sprinklers, sewer lines under the front lawn).
Plumbing (often covered in or under the home, but not the lines running out through the yard. Leaks from rust are often not covered too)
Electrical Systems
Water Heater again, consider code compliance if a replacement is needed
Furnace or other types of heating (radiant, baseboard electric, etc.)
Air Conditioning may be optional
Heating Ducts often not covered if the ducts have been lying straight on the earth and get rust
Water Pump
Dishwasher these are usually covered
Stove/Cooktop/Ovens these are usually covered
Microwave
Refrigerator may be an extra charge for coverage as it’s “personal property”
Washer/Dryer may be an extra charge for coverage as these are “personal property”
Swimming Pool, Spa/Jacuzzi/Hot Tub may be optional
Foundations are not usually covered, but check!
I welcome your input on home warranties. I would like to make this page as helpful as possible for my buyers and sellers!
