Demystifying the Home Warranty


You’re buying a house, it’s new and it’s exciting but things can go wrong, things can break and things need to be fixed  – so you need to be protected.

The best way to understand a home warranty is to think of it like buying a car. Before you can drive your nice new car, the law requires you be insured or you won’t be driving for long. It is almost the same for your home; most banks will require you to have insurance before giving you a mortgage. Like a car, your home owners insurance will cover accidents. If a tree branch falls through your roof, a pipe bursts and floods your basement, or a fire breaks out and scorches the living room then you pay the deductible and insurance will likely cover the rest.

When you buy a new car it will usually come with a 2 year warranty to cover anything mechanically that may go bad such as a transmission or engine. You can buy an extended warranty which covers all those same components for an extended period of time. Your house will not come with a 2 year warranty but you can buy a warranty that will cover the mechanics of your house such as the water heater, the HVAC system or washing machine which can cost thousands of dollars. All you’ll usually have to pay for is the service cost to send out a technician. Ultimately you get to decide what you want covered and this will determine the cost of your warranty.

Not all home warranties are purchased by the buyer. Sometimes sellers or real estate professionals my offer them as incentives. In that case, I’d suggest accepting it with open arms. If you are thinking about purchasing one, here are some things to keep in mind before buying into this warranty deal. Your warranty company may decide who is going to come and fix whatever it is that is broken. If you don’t want to deal with finding a repairman, this may not be an issue, but be warned that you get what you get. Also, if it’s already broke, too bad. Your warranty won’t cover those things in your home that were already in disrepair prior to obtaining the warranty.

Before you decide to take your “new car” out for a spin, make sure you decide if you want a warranty to cover the potentially expensive costs of maintaining it.

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