What is a home warranty - photo with very old furnaceAre you considering purchasing a home warranty for your Silicon Valley home? The home warranty gives the buyer and seller both “peace of mind” regarding any surprises after the close of escrow. It is a one year policy, so at the end of that year, the homeowner may want to renew it or purchase a new policy.

If you are not sure what a home warranty is, or how it differs from home insurance or title insurance, please read this article: Homeowner’s Insurance, Title Insurance and Home Warranties on this same site.

Not sure if you need a home warranty or not? If your property is close to new and the appliances are all under warranty, you may not want to spend a few hundred dollars for this coverage. For older homes that you plan to live in without renovating much right away, a home warranty is a really excellent protection. In between? Read the policies on the various providers websites. As with all types of insurance, there are limitations, exclusions, and possible add on items or riders.

How do you make the best selection for your needs?

Its a good idea to get some basic information on plan coverage generally. The California Home Service Contract Association (CHSCA) provides useful information on this subject. The link is     http://www.homeservicecontract.org/state-associations/california/    Request brochures (or read them online) from a few of the companies listed below. There will be some differences in coverage, cost, and co-payment.  This page lists members who sell home warranties in CA.

What are some things you should consider when purchasing a home warranty in Silicon Valley?

(1) Like in other industries, some of these companies may be connected to each other or owned by a parent firm

(2) Some companies have better “track records” than others. I would suggest checking in with neighbors in your area to see if they are happy with their providers, using sites like Nextdoor.com and Angie’s list.

(3) Ask your Realtor, or people who have recently bought homes what their experience has been like with home warranty providers.

(4) My own provider of choice is Old Republic. I find that their service providers call in a decent amount of time and the coverage is good.

Whats the cost of a Home Warranty in Santa Clara County?

There are two main types of coverage, Sellers and Buyers, and under the Buyers category there are sometimes sub- types of coverage (or add-ons) available .

Sellers Coverage : Home warranties can be purchased for the escrow period (from the time the listing is signed to when it closes escrow and title is transferred). This is called Sellers Coverage (the seller still owns the property). The cost is usually minimal – less than a dollar a day – but the coverage is normally not as extensive as buyers coverage (for after escrow is closed).

Why get sellers coverage? Sometimes things break before the home transfers title (dishwasher, disposal etc.) – these sort of items are usually fully covered (except for a small co-pay) by sellers coverage. Often there are big-ticket-item surprises when the inspections are done, though. For example, if its discovered during the home inspection that the furnace has a cracked heat exchanger, the seller will usually be stuck having to pay for a new heater. It will be about $2200 to replace most units, and it must be done (as a cracked heat exchanger can cause carbon monoxide poisoning. With sellers coverage, many home warranty policies will cover $500 of this cost. The cost of sellers coverage is usually well under $100 and provides good peace of mind for the ˜what ifs of the inspections. It may not always 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 sellers coverage on a home warranty with ALL my listings when my seller client agrees to providing buyers coverage for the purchaser)

Buyers Coverage: A Buyer’s Warranty usually ranges between $350 and $700, depending on the type and size of property (condo/townhome 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 buyers 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!

How Comprehensive Is Your Home Warranty?

Probably the most important thing for the consumer to know is how comprehensive the policy is. Read the document – and ask the sales rep ˜what isnt covered? Also check to see if the policy includes the full replacement cost for appliances and other items.

Are you buying an older home? If so, an important aspect to know is whether ˜code compliance is included or not. For instance, imagine a 60-80 year old house in a lovely old section of San Jose. If the water heater was installed in a small closet and ends its useable life, it must be replaced – but cannot go back exactly like it was before! The city of San Jose will require that it get a permit (and a final) for for that, it must be placed on an 18 platform, be strapped to todays standards, and so on. Even more, moving that water heater will mean also moving some plumbing around. That can be expensive! Standard home warranties cover part of this job, but will not include these costly code compliance issues. However, many home warranty companies have additional coverage available (at a cost, of course) 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 is usually covered by a home warranty policy?

Plumbing – mostly in or under the home, but not beyond the foundation. Leaks from rust are often not covered too – will not include roto-rooter type work or sewer lines.
Electrical Systems – when things were working but stopped doing so
Water Heater again, consider code compliance if a replacement is needed
Furnace or other types of heating – radiant heating may not be covered by most providers
Air Conditioning – is usually an add-on option, but may be covered by some policies
Heating Ducts often not covered if the ducts have been lying straight on the earth and get rust
Water Pump
Kitchen Appliances such as the Dishwasher, Disposal, Oven, Stove etc. are usually included
Refrigerator, Washer and Dryer
may be an extra charge for coverage as its ˜personal property
Swimming Pool, Spa/Jacuzzi/Hot Tub – not covered by regular policy but may be an ˜add on

Foundations and roofs are not usually covered, but check!

Expect a service charge or co-pay

Home warranties usually include a co-pay of something like $65 to $75 for a service call. Check to see if it’s a one-time fee, or if they may charge fees for each visit.

Some consumers feel that buying a home warranty is a rip off, and others feel it protects them from surprises that first year of home ownership. In my experience, a good home warranty policy is a wise thing to purchase in an older home when the new owner does not expect to do remodeling and wants to continue using the current appliances for the next year or so.