Home warranty helps if home inspection waived

Within the first year of homeownership, the most common service requests to home warranty firms are for air conditioners, plumbing leaks, water heaters and refrigerators. (Photo for The Washington Post by Callaghan O'Hare)

For some buyers in the highly competitive housing market in 2021, waiving the option of a home inspection has become one way to entice a seller to choose their offer for a house.

The responsibility for fixing any flaws in the house, its appliances or systems shifts to the buyers rather than sellers if a home inspection is waived completely or if the buyers choose to have an "information only" inspection. Approximately 25% of buyers waived the home inspection contingency in May, according to the National Association of Realtors.

Some home sellers and real estate agents provide a home warranty for buyers as part of a real estate transaction. Buyers can also buy their own home warranty plan to offset some of the risk taken by eliminating a home inspection.

"An inspection contingency allows buyers to cancel a purchase or request repairs if an issue is identified during the inspection period," wrote Raj Midha, a senior vice president and general manager of American Home Shield, a home warranty company. "Once that option is waived, new owners eliminate one of the layers of protection designed to safeguard their budget and stress levels. A home warranty or service plan can provide budget protection by helping to cover repairs or replacement if essential home systems and appliances break down after the home purchase."

However, many home warranty plan customers find the policies frustrating. Home warranty companies ranked 10th on the list of industries receiving the most customer complaints filed with the Better Business Bureau in 2018. According to Consumer Reports, a prime reason for those complaints is the lack of understanding about what a home warranty plan covers.

We asked Midha to provide us with some insight into how home warranty policies work.

Q: How much does a home warranty cost?

A: On average, home warranties cost from $500 to $700 per year, in monthly payments of between $40 and $60. Pricing varies based on the plan you select and location of your home. You typically pay a trade service call fee when you request service. At American Home Shield, we offer a choice of a service call fee of $75, $100 or $125 to help you manage your budget and out-of-pocket expenses.

Q: What should homeowners look for in a home service warranty provider?

A: Homeowners should look for a well-established provider committed to transparency in coverage terms, service procedures and pricing. It's important to also understand how a provider fulfills its service requests. For example, American Home Shield uses a nationwide network of more than 17,000 licensed contractors who have been evaluated and background checked.

Q: What are the most frequent repairs homeowners should prepare for?

A: Within the first year of homeownership, the most common service requests are for air conditioners, plumbing leaks, water heaters and refrigerators. American Home Shield has 2 million members and 20% of them place a service request within the first 30 days after the close of their house.

Q: How can consumers evaluate the best warranty plans for their needs?

A: Every house and owner is unique, so it's important to select a plan that provides maximum coverage for the appliances and systems you use most, based on your individual budget.

Q: Are there any surprising things that can be covered in home service warranties that homeowners may not realize are available?

A: Maintenance options like HVAC tuneups and re-key services are available in addition to add-on protection for personal in-home electronics. You can cover garage openers, ceiling fans and whirlpool tubs in addition to home appliances and systems. Homeowners may also be surprised to find that we cover older items, no matter their age, and don't require maintenance records or home inspections.

Q: Why should homeowners consider having both homeowner's insurance and a home warranty?

A: An easy way to differentiate a warranty from insurance is that homeowner's insurance protects against things that might happen, like fires, theft or natural disasters. Warranty plans protect against things that will happen, like oven and A/C breakdowns. Unlike warranties, insurance can cover theft, loss or damage, and general liability that can arise when a person is injured while on your property.