How to Pick the Best Home Warranty For Your Client

Guest Blog by Joshua Lopez, Landmark Home Warranty

As a buyer’s agent, you’re responsible for a lot in a real estate transaction to make sure everything goes smoothly. One of those things can be picking out a home warranty. But – how do you know which home warranty plan is the best for your client? After all, picking a good home warranty plan reflects well on you and can result in future business from the homeowner – or referrals. Unfortunately, there’s not a “one size fits all” home warranty plan that works for every home and homeowner, either. Use these tips to pick the best home warranty for each unique homeowner and house.

1. Determine What Coverage the Home Needs

To begin, look at what type of coverage the home needs from a home warranty. It might be easy to say, “Well, I want my buyers to have coverage on everything!” But unfortunately, you’d be hard-pressed to find a home warranty that covers every part of a home’s systems and appliances. Otherwise, their yearly premiums would be sky-high. Instead, pick the home warranty based on what your clients’ needs are. You can determine what your clients need coverage on from a home warranty by asking these three questions:

1. Are there systems or appliance that are well maintained, but nearing the end of their lifespans?

2. Are these systems and appliances expensive to repair or replace?

3. Are these systems and appliances integral to the comfort of the home?

Systems and appliances that meet these requirements should go on the list of what you want covered in your client’s new home. These are the “problem areas” and what they’ll probably need help repairing or replacing in the upcoming years of home ownership. Once you have a list of the systems and appliances that need coverage, begin looking at the home warranty companies that provide coverage on these items.

It’s important to note that using the home inspection report as a guide to what may need to be covered by a home warranty is a good start. However, a majority of home warranties do not cover systems and appliances that show they have problems in the home inspection report. You can use the home inspection as a jumping off point, but if you want those items to be covered by a home warranty, you’ll need to give the home warranty proof that they were repaired before the date the warranty begins coverage on the home. 

2. How Experienced Is Your Buyer?

Next, consider how experienced your buyer is with home repairs. A home warranty not only provides cost savings, but it also provides a guarantee for a qualified professional to do the repairs and replacements.

If your homeowner is an avid DIY repairer who likes to get their hands dirty and is extremely experienced, they might want something that covers the bigger systems in the home that they don’t have enough experience to repair. If your homeowner is a brand new homeowner, you’ll probably want a home warranty that covers a lot more of the smaller repairs and replacements within a home. You may want to include some add-ons to the basic home warranty plans to help cover new home buyers. Some home warranties have things like roof repair coverage or extreme pipe-leak repair that may be attractive to first-time buyers.

3. Read Through the Contract Thoroughly

After determining what your buyer needs coverage on and how much they need, it’s time to start comparing home warranty contracts. Make sure to read through the contracts with your buyer to help them understand the basics of a home warranty. Teach them that a home warranty has two main parts: the yearly premium and the service call fee that they must pay to the contractor who comes out to their home for diagnosis. Most home warranties allow you to look at a sample contract for your state or region that outlines what they cover, exclude, and limits. For your convenience, we’ve outlined their basic descriptions below:

Covered: This is what items the home warranty will repair or replace if they fall in line with the overall coverage of the home warranty contract. (This means, for example, a home warranty may cover an oven and it will be listed in the covered items section of the contract, but they’ll only cover the oven if it has failed from normal wear and tear, not because someone has purposely damaged the oven because they want a brand new one.)

Excluded: This section explains what is not covered under the contract. This may be smaller parts of a system that are less than the service call fee, so a waste of your buyer’s money, or systems or appliances that are obscure.

Limits: Home warranty companies do limits two ways. Some home warranties have an overall limit on contracts, meaning they’ll cover any repair or replacement in their contract up to a certain monetary amount, and after that, the home warranty is useless and the homeowner has to pay all repairs and replacements out of pocket.

Other companies just have limits on certain parts of their home warranties, meaning that they’ll pay up to a certain dollar amount for a repair or replacement on that item, and then the homeowner will have to pay the rest out of pocket.  Beware: most home warranties that are low in price have lower limits, making your buyer pay more out of pocket for repairs.

After reading and comparing the coverage from each home warranty, pick the one that has the best coverage for your buyer based on what they need coverage on, your buyer’s homeownership experience level, and what the contract states.

Home Warranties: What to look for and how to advise your clients

In our competitive and busy market, many buyers are no longer asking for home warranties as part of the purchase contract, and homeowners certainly don’t feel the need to offer them. So why, as an agent, should you worry about home warranties? Because your clients will want to know if they should buy one and they’ll turn to you for advice. Be prepared to offer an expert opinion with our tips.

Coverage

Have the client look at the seller’s disclosure, the inspection report, and think about their personal observations. Home warranties repair or replace things that break down from normal wear and tear. Have your clients make a list of things in the home that are well-maintained but nearing the end of their expected lifespan, are expensive to repair or are necessary for quality of life. These are things like hot water heaters, HVAC units, and appliances. These are the things that your client will want to ensure are covered. Have them keep those things in mind when they are reviewing their coverage options. Remember that major structural items, like the roof and foundation are generally covered by home owner’s insurance and not home warranties. Also, if the home is new or has new systems, the manufacturer warranty may offer some initial coverage, initially reducing the need for a really substantial warranty policy

Pricing versus Coverage Limits

Your client will want to consider the cost of the premium of the plan, as well as service call fees. And they will also want to consider the limits of the policy. If they are really concerned about the HVAC unit breaking down in the middle of a heat wave, then they will want to ensure that the policy they choose will cover the cost of a new system if needed. Some policies will limit the amount of coverage available on certain items. They need to consider the value having a policy given the amount required to repair an item unexpectedly versus the cost of the policy, service fees, and whether the limits will cover the replacement costs.

Keep in mind that home warranties won’t cover problems arising from a lack of maintenance or known conditions. For instance, you can’t buy a home warranty policy if your air conditioning is already broken and then expect the warranty to cover that system.

Who is doing the work?

If your clients have preferred contractors, have them ask whether they are contracted with a home warranty company and which ones. When they are reviewing policies, they should ensure that the warranty company only works with contractors who are licensed and bonded in Texas. Your clients should ask about their vetting process and how they handle work that doesn’t meet correct standards.

Why should your clients consider a home warranty?

The average annual cost of a home warranty is several hundred dollars. That can mean conservable savings if something expensive break down. A $400 warranty is well worth the money if you are replacing an $8000 air conditioner. Cost savings aside, a home warranty can offer some peace of mind if your client is doesn’t have cash on hand to handle an expensive repair.

Make sure your clients read online reviews of different warranty companies before they make their final decision. Not all warranty companies are the same.

Home warranties can be a great option for your clients, and you should make sure they understand what is – and isn’t – covered before they buy their policy. If they do opt to buy a policy ask them to tell you what company and policy they chose. You might even ask if you can write their policy number in their file. Because your clients will call to ask you for recommendations for contractors when the oven breaks, or the garage door won’t open. If they’ve bought a warranty, you could save them a lot of money and heartache when you remind them to call their warranty company. Having that policy information on hand will be a great benefit to your clients.

And THAT’S how you become their trusted real estate advisor for life. 

Do your buyers know what’s in their credit report?

Many buyers want to look at houses first and worry about their credit later, and many Realtors don’t want to show potential buyers homes unless they’re already working with a lender. You can help explain to your buyers why lenders need all of the information they do and how they use a credit report. Here’s and handy guide to share with them.

You can’t afford not to get your credit report

The Fair and Accurate Credit Transactions (FACT) Act of 2003 made it possible for consumers to access free copies of credit reports (also called credit-file disclosures). The free reports list key aspects of your financial history.

Before you apply for a loan, you should request a free credit report to get an idea of what a lender would see. If the report has errors, you can correct them before they affect your ability to qualify for a mortgage loan. And if you find legitimate flaws, you might be able to take steps to improve your credit standing before purchasing a property. Your Texas Realtor may be able to help you find resources to repair your credit.

How many credit reports can you request?

You can request one free credit report every 12 months from each of the three major consumer credit-reporting agencies: Equifax, Experian and TransUnion. But you don’t have to get all three reports at once. How many you request and when is up to you. If you know you will be applying for a loan soon, you might choose to receive all three at the same time to look for errors or legitimate problems that only appear on one or two of your reports. You can also directly compare all three reports at the same point in time.

Or, you can space out the reports to receive one on a quarterly basis or one each month for three months in a row. Getting the reports periodically can help you monitor changes and is a good way to find out whether you have fallen victim to identity theft.

What’s in the report?

A credit report lists how much you borrow, whether you pay on time, if you’ve been sued or have declared bankruptcy. The disclosure includes some information that a third party would not receive, such as medical-account info.

It’s important to note that a credit report is not the same as a credit score. If you want your credit score, you typically have to purchase that information.

How do I get my reports?

You can request free credit reports online at www.annualcreditreport.com. You’ll be required to provide your date of birth, Social Security number and current and previous addresses so the credit agencies can obtain your information. The site is encrypted to ensure a private and secure connection. During the process, the site may ask you to verify previous addresses or accounts you hold to further verify your identity.

Once your information is verified, your report will appear on the screen and is usually available to download onto your computer. If you find errors, you should work directly with the credit-reporting agencies by submitting written documentation of the mistakes. Their sites are www.equifax.com, www.experian.com and www.transunion.com.

If you do not want to use the Internet to access your reports, you can request them by phone at (877) 322-8228. You can also mail a request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Ga., 30348-5281.

Beware of any person or organization that sends you an email offering you a credit report or ads you see claiming to be from www.annualcreditreport.com. The FTC warns that you should not reply or click those ads, as they most likely are scams.

A legitimate report, though, that you request through the Web site, by phone or by mail can help you make sure your credit is in good shape to pursue your dream of buying a home. 

Foreign Buyers Flock to Warmer Dwellings

It’s not uncommon to hear of friends, family and neighbors packing up and heading to a second home in warmer states during the winter months. After all, many parts of the country experience brutally long bouts of cold and snowy weather. However, U.S. citizens are not the only people looking to spend at least some of their year down south or out west, whatever the reason. According to the National Association of REALTORS® 2015 Profile of International Home Buying Activity, just four states accounted for half of all international home sales: Florida (21 percent), California (16 percent), Texas (8 percent) and Arizona (5 percent).

Our Own Global Business Council has been working hard to ensure MetroTex REALTORS have the deepest understanding of Dallas’ place in the global market and how to work with international buyers and sellers.

International activity in North Texas is growing quickly. Increasingly, we’re seeing activity from China and India in addition to our important relationship with buyers and sellers from Mexico and their neighbors to the south. Interestingly, the most international online property searches for Dallas-Fort Worth are coming from people in Canada, Mexico, the U.K., Germany and Australia. It’s reasonable to expect interest to translate into dollars at some point. International activity is a big reason why cash sales account for approximately 30 percent of all sales in the region.

Rapid population growth, lots of industry moving into the area and an increasing number of long haul non-stop international flights make the region more attractive to a globally-minded crowd. As a REALTOR®, your ability to take advantage of the global market are dependent on your expertise and knowledge. Becoming a Certified International Property Specialist and a member of the MetroTex Global Business Council should be are essential part of your business plan. Find out more by joining us at the next Global Business Council meeting on July 20 at MetroTex Dallas. Contact stevet@dfwre.com for more information.

Millennial Attitudes to Homebuying Varies by Region

Will Millennials ever decide to buy a home? The common perception is that they’re just not interested. However, new research indicates that attitudes toward home buying vary more by region than by generation.

Selfie or searching MLS?

According to a recent survey by the National Association of REALTORS, millennials both see the financial value in homeownership and want to own someday. And here in Texas, that attitude is especially prominent. In NAR’s quarterly survey, millennials in the South are most likely to believe homeownership is a part of their American dream (at 91 percent), followed by those in the West (at 90 percent). Millennials in the Northeast and the Midwest followed closely behind at 88 percent and 84 percent, respectively. As for homeownership being a good financial decision, the numbers were a little more even across regions—86 percent of millennials in the West agreed with that statement as did 85 percent in the South and 84 percent in both the Northeast and Midwest.

Part of that may have to do with age. The oldest Millennials are now 34, have largely completed their education and are likely several years or more into their careers. It would make sense that they are now more inclined to settle down, buy a house and build equity. Here in Texas, 66 percent of them feel like now is a good time to buy. While that figure is significantly less than the 77 percent of Gen Xers who feel like it’s a good time to buy, it’s still a sign of shifting attitudes among younger professionals. And if you have a look around at all of the construction cranes, you’ll see that Millennials are very interested in buying both in urban and suburban areas, and are largely leaving rural areas behind.

If you’re looking to expand your pipeline to reach first time buyers, make sure you know how to communicate with Millennials effectively. Take some classes here at MetroTex to modernize your toolbox. For example, the DISC personality profile class will teach you how to read personalities and adapt your communication style to work better with them. Our technology classes will show you both how to become more efficient in your work and how to reach Millennials where they already are. Check out our course calendar at mymetrotex.com and register today.