When you buy a house, you are offered the option by your realtor to purchase a home warranty. In some cases, the seller might even offer to throw in a home warranty at their own expense. The big question is, are home warranties worth it?In this two-part series, we will discuss the advantages and disadvantages of getting a home warranty for a rental property.
What is a Home Warranty?

The first home warranty was introduced in 1971 by American Home Shield. This launched the home warranty into a whole new industry, with dozens of companies competing to sell home warranties to home buyers.

A home warranty is not actually a warranty as the term is commonly understood. The warranty does not guarantee the quality of the home or fixtures. Instead, a home warranty is a contract for home services. The home warranty will pay for the repair or replacement of items in the home that break down as the result of common maintenance issues. Specifically, the home warranty usually covers appliances and home systems that tend to break down through normal wear and tear.

It is very important to keep in mind that not every single thing that breaks down in the home will be covered by the home warranty. In fact, home warranty companies are well known for refusing to cover repairs on the basis of a pre-existing condition or homeowner negligence.
What Do Home Warranties Cover?

Most home warranty companies offer two types of home warranty policies – basic and premium. The specific coverage of a policy will, of course, vary based on the company and policy. Generally speaking, though, most policies are pretty similar. A basic policy usually covers appliances (refrigerator, stove, dishwasher, etc. ), heating and cooling system, plumbing system, and electrical system. A premium policy usually covers all of those items covered by the basic policy and additionally covers the roof, well, swimming pool, plumbing fixtures, lighting fixtures, and outdoor sprinkler system. The structure of the home is not normally covered by a home warranty; the structure itself should be covered by your homeowner’s insurance policy.
What Items Are Excluded by the Home Warranty?

A home warranty usually looks great on paper; if your garage door opener breaks, they’ll replace it!If your refrigerator quits refrigerating, they’ll fix it!Like so many things that seem too good to be true, a home warranty often doesn’t live up to the promise. There are lots of loopholes in the policy that keep the home warranty company from having to pay up. For example, the plumbing system may be covered, but coverage will be denied if the damage is due to the pipes freezing. In addition, plumbing may be covered, but that coverage is limited to the actual pipes. Additional parts and fixtures, which are the most likely to break, are not covered.

Home warranties make big promises, and they seem like a simple, affordable way to protect your home and minimize home repair expenses. There certainly are times in which a home warranty can come in handy. However, it is important to have realistic expectations. A home warranty does not mean that you will never have to pay for repairs. For more information on home warranties, check out part two of this series.

McMath Realty provides property management services in Phoenix, Scottsdale and all of Maricopa County of Arizona. We can help you by taking care of all of the day to day headaches of being landlord, including coordinating repairs. If you have a rental property, get in touch with McMath Realty to find out more about our property management services.

Home Warranties for Rental Properties – Part 2

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