We often get questions about whether or not one should have a home warranty policy to cover maintenance issues on their property. Here are some questions to ask yourself:
How many repairs will be covered by a home warranty?
Typically only mechanical failure is covered by a home warranty. Many repairs are not mechanical failure and often repairs are the responsibility of tenants due to tenant actions.
Will the cost of the home warranty plus the cost of the service fees outweigh the actual costs of the maintenance?
The cost of the typical home warranty is $400 to $500 and the service charge for a maintenance call is between $60.00 and $100.00. Often the repair is for something small like a leaking faucet. The Home Warranty Company prefers to repair the faucet rather than replace it. At a $60.00 service fee a plumber could probably repair it for the same price or very little more. However, often the wisest thing would be to replace the faucet. Five service calls at $60.00 per call is $300.00 plus the $400.00 for the policy totals $700.00. Ask yourself if you believe you will have $700.00 worth of repairs on your property that are covered by a Home Warranty over the course of a year.
Next is a discussion about Air Conditioning units.
The average cost of Air Conditioner repairs over the past year for all calls on all properties managed by McMath Realty was about $350.00. Typically the Air Conditioner is the biggest item covered by Home Warranty. Most Home Warranty companies select vendors that give them the best price. Since the vendor is not making as much money on a home warranty repair as they would on another customer, who do you think gets priority? Of course the AC will generally break down when the outside temperatures are over 100 degrees wich is considered a health and safety issue. Under Arizona Landlord / Tenant Law the tenant may give written notice that the lease will terminate in five days if the problem is not corrected and should the lease terminate under these conditions the tenant is to receive all of their deposits back. The tenant may also seek substitute housing while the Air Conditioning is out and the property owner will be liable for prorated rent plus 25% while the tenant is in a motel waiting for the Air Conditioning to be repaired. McMath Realty LLC has relationships with Air Conditioning vendors that can be at the home the day of or the next day at the latest. We have seen home warranty vendors take ten days or more to resolve Air Conditioning problems while the tenant either suffers in the heat or spends their nights in a hotel. This creates bad relationships with the tenants and gives them pause when it comes time to renew the lease. The vacancy cost could be far more than the savings from a home warranty.
Based on this information is a home warranty worth it to you?
Weldon McMath – McMath Realty Property Management