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.