Home Warranties
Wednesday, May 18th, 2016
By: Solange Velas, CCIM
Photo courtesy of Worthclark.com
There are many factors to consider when deciding whether to purchase a home warranty for your rental properties. Those factors can make the process seem time consuming and overwhelming. However, this can be done methodically & thoroughly, making sure the decision you make is the right one, for you and your property.
Ask yourself; what’s the age & condition of the home, appliances, and mechanical systems? If these items are new(er), are they still covered under their original warranties? If the answer is yes, a home warranty may be an unnecessary expense & the money would be better suited in an emergency fund; for that particular property. If however, items are older & are no longer covered by those original warranties, depending on the condition of individual appliances & systems, you could determine a home warranty will save you money in the long run; providing expected repairs/replacements would be covered in the contract.
After that, if you decide you need a home warranty; shop around. Narrow it down to your top two or three companies. Find out if the warranty company itself is licensed (not all states require licensure). Do they use established, licensed, bonded & insured professionals to provide services? There is a difference in a new company drumming up business & one that has been around for decades. This doesn’t mean quality of work will vary but, it is information you will want to know. Is the company available 24/7 to make claims?
When reading contracts from those top companies, compare initial cost of the policy; but, don’t let that be your determining factor. The biggest issue with home warranties seems to be in the fine print; like most contractual complaints. Compare costs for service calls & deductibles for replacements. Determine what the policy actually covers, regarding appliances & systems. Some items that are not covered in a basic policy may be covered for an additional fee. Other items you are seeking coverage for may be covered in an insurance policy. Find out what issues will be covered; “normal wear and tear” is a subjective phrase.
If you have questions for the companies at this point, ask! This process can give you a feel for their customer service.
Understand your limits as a landlord; servicing or fixing a problem yourself or through your handyman might violate a contract. Keep in mind, helpful tenants could also violate a contract & not all warranty companies will reimburse for repairs that would have been covered, had they been initially contacted.
Once this data is gathered, you will be well informed & should have a general knowledge of each company. The great thing is, warranties are purchased annually so, whether you decide right now you don’t need one but may in the future, or, purchase one now, later determine you are better off with an emergency fund, or to simply switch companies, you certainly can!
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