I saw an interesting advertisement this week for American Home Shield, the home warranty company. The ad was specific to California but has lessons for everyone I think.
American Home Shield is one of the larger Home Warranty companies. They provide policies to homeowners - usually people just closing on a home - that cover the failure of various systems in the house during a specific period. Normally you'd get a home warranty if you were buying a resale house that had a few years on it so that you'd have some protection if the air conditioner failed during the first year.
Last year, AHS spent more than $40 million fulfilling service requests from its California customers. What is interesting is what the money was spent repairing. Here's the breakdown:
Appliances - $13,063,685 32.3%
Plumbing - $10,414,745 25.7%
Air Conditioning - $ 8,178,977 20.2%
Heating - $ 4,550,396 11.2%
Pool/Spa - $ 2,717,506 6.7%
Electrical - $ 1,286,154 3.1%
Other - $ 237,548 .58%
I think it is interesting that almost a third of the money spent on claims goes to repair or replace appliances. Of course some appliances are built in: dishwashers, disposals, some stoves and so on, but many are not attached to the house and are therefore something to be bargained over during purchase: refrigerators come to mind. The point is this: if you are buying a house including appliances and DON'T plan a kitchen remodel, check them out thoroughly. Ask for owner's manuals and any existing warranties. And before you walk away from a home you really want because the seller won't throw in a ten year old refrigerator . . . well, maybe you don't really want that refrigerator at all!
Number two is plumbing. This is a biggie and makes a Home Warranty an important part of any home purchase. So many unseen events can compromise plumbing - things even a home inspector won't find - that having a little protection is a good idea. And plumbing repairs - whether it's digging up a drain clogged by tree roots or dealing with the water heater that fails and floods - can be expensive. I am struck by the fact that 25% of the money spent on claims was for plumbing issues!
The rest of the list probably doesn't bear much dissection. There are two things, however:
- Just 6.7% spent on pools and spas. The low number is because there are relatively few pools and/or spas and because Home Warranty coverage of these things is usually an option at an additional cost.
- And just half of one percent spent on items other than the six that preceded 'Other.'
I think, if you are buying a home, you now have six major systems you need to examine closely. If there's going to be a problem, it is probably going to be here. The best way to do this is to hire a professional home inspector to go through the home with a fine tooth comb. Make sure the resulting report covers the big six.
As an aside, there is a great truth about home inspections: they are very valuable AND they always turn up something. Don't expect your home inspection to result in a 'clean' report. There's no such thing. When you get the report, go through it carefully and rationally. Most items will be minor. If there is something major it can become a negotiating point between you and the seller.
Finally, while we've been looking at information from American Home Shield, they are but one of several reputable Home Warranty companies. I always recommend a warranty on a resale property. The last thing you want your first year in your dream home is a costly repair bill for an unforeseen problem! Warranties usually cost between $400 - $600 and can cover one to two years. Often they are extendable.