Seller offering a home warranty instead of repairs?

Should you accept a home warranty instead of repairs?

Not if the seller is offering a home warranty for a problem your inspector already found. Ask for the repair or a credit on that item, and take the warranty only as an extra on top. Warranty plans commonly refuse to pay for conditions that existed before the plan started, and a finding on your report already exists.

Key takeaways

• Ask for a repair or credit; take the warranty only as an extra.
• A warranty pays up to the plan's limit for that item, not your repair bill.
• If the seller offers only a warranty, treat it as a refusal and decide whether to accept, counter or walk.

What is the seller actually offering?

The seller is offering a service contract, not a fix. It pays to repair or replace covered appliances and systems when they stop working. It is not insurance, and NerdWallet says it covers items when they break down from normal wear and tear.

When something breaks, the company sends its own technician, then approves or denies the claim. Every visit costs you a service fee, typically $75 to $125, even when the claim is denied. And plans generally make you wait 30 days after signing up before you can file a claim at all.

To size the credit, you need your own repair number. Kept prices every line of an inspection report for $79, usually under 4 hours, and how Kept prices explains where the figures come from.

Will a warranty cover what your inspector found?

Not if the plan calls it pre-existing, and only the plan's written terms decide that. Consumer Reports warns that a preexisting condition can let the provider deny coverage, even one that wasn't evident when the plan was bought. A finding your inspector wrote up is about as evident as it gets.

Compare these other common exclusions with your report:

• Rust, corrosion or sediment that caused an appliance or system to fail.
• Structural issues, such as foundation problems.
• Problems caused by improper maintenance or improper installation.
• Nonmechanical items, such as windows or the structure of the home.
• Parts of a covered item. Consumer Reports notes some policies may cover a water heater but not the water tank itself.

Have your agent get the plan name and contract from the seller's side before your deadline, and read its "Exclusions" and "Limits of Liability" sections.

What could a warranty cost you on a known problem?

Take NerdWallet's air conditioner example: a $3,650 repair on a plan that pays up to $3,000 for HVAC repairs, with a $100 service fee. Say that repair is the finding on your report. These numbers leave out the $65 monthly fee in NerdWallet's example.

• Credit for the full repair: you have the whole cost in hand.
• Warranty approves the claim: you pay the $650 over the limit plus the $100 fee, so $750.
• Warranty denies the claim: you pay the full $3,650 plus the $100 fee, so $3,750.

That's for a repair. If the unit needs replacing, the gap can grow. Plans often depreciate items as they age, NerdWallet notes, so you'll likely pay something toward a replacement even when it's covered.

Are home warranties a rip-off?

Consumer Reports says whether one is worthwhile is ultimately up to you, and warns that providers build in wiggle room that can make it easier to deny payouts. Read the terms before you count on one.

What does Dave Ramsey say about home warranties?

Ramsey Solutions says a home warranty isn't worth it for home buyers or homeowners, since most minor home repairs cost less than $500. It makes one exception: when a seller includes a one-year warranty, take it, or ask for a lower price if you skip it.

What should you ask the seller for?

• The repair or a credit on each finding you care about. Size it to real prices, not a round number. What to ask for after a home inspection covers which items are worth it.
• The warranty as an extra, if it's offered. Take it on top of the repair or credit, never in place of one.

Put the dollar figure for each item in your buyer repair request letter. If you're weighing a fix against money, repairs vs. credit vs. price reduction compares the three.

What if the seller will only offer a warranty?

Treat it as a refusal to fix the item. For anything large, get a contractor's written bid so you know what you're giving up. What to do if the seller refuses repairs lays out your moves.

You can accept the item as is, counter with a smaller credit, or walk away if your inspection contingency allows it. When to walk away after a home inspection helps you decide if the deal still works. Your contract sets the exact dates and terms, so confirm them with your agent or attorney.

If the seller is offering a warranty in place of a fix, upload your inspection report to Kept and get a dollar figure for each finding to ask for instead.

Sources

• NerdWallet, "Home Warranty Pros and Cons"
• Consumer Reports, "Is Buying a Home Warranty Worth It?"
• Ramsey Solutions, "What Is a Home Warranty? And Is It Worth It?"