Many first time home buyers that may have been renting may worry about making home repairs in the first few years of owning a home. Many first time home buyers are on a tight budget that can restrict how much they're able to repair. Knowing the details of these policies can help the home buyer decide if a home warranty is right for them. If you're a home buyer who is in escrow or who will soon be making an offer on a home, here's what you need to know about home warranties.
What Is a Home Warranty?
A home warranty is a contract between a homeowner and home warranty company. The contract guarantees home repair services under certain conditions. A typical home warranty will last for one year from the date of the purchase of the home.
How Does a Home Warranty Work?
A home warranty is a policy that will pay to repair certain types of home fixtures under certain circumstances. For example, a typical and basic home warranty policy may pay to make repairs to the oven, dishwasher, plumbing and some electrical problems. The policy may specify that it will not cover pre-existing conditions, and also will not cover problems that occur because of incorrect installation.
Exactly what fixtures are covered may vary depending on the policy and the company. Many companies will give homeowners the option to add on certain fixtures for an additional cost. Sometimes these additional fixtures are site-specific, like the septic tank, pool and hot tub.
If a claim is made against a policy, the homeowner must usually pay a deductible. Once the deductible has been paid, the home warranty company will contact a company that they contract with to make the repair. During this time, the homeowner waits for the contracting company to call them and schedule the repair.
Is a Home Warranty a Homeowners Insurance Policy?
A home warranty is not a homeowners insurance policy. A homeowners insurance policy covers damage to a home's structure for qualifying events, like a wildfire or a wind storm. A home warranty policy covers wear and tear on home fixtures and appliances, like sink faucets and the furnace.
Generally speaking, a homeowners insurance policy will not pay to repair fixtures or appliances unless they were damaged because of a qualifying event. Home warranty policies do not cover damage that occurs because of specific events. Instead, home warranties provide for repair in the event that a fixture breaks.
How Does a Home Buyer Get a Warranty?
Sometimes, home warranties are included in the purchase of a Green Hill home. Sellers like to include home warranties as a bonus for home buyers, to "sweeten the deal." The home warranty is purchased when escrow closes, and is usually paid for out of the profit on the sale of the home. It becomes active as soon as the home is sold and the new buyer takes possession.
If a home warranty is going to be included in a home purchase, it will appear in the purchase contract. Home buyers who do not see this in their purchase contract may wish to purchase a home warranty policy on their own.
If you're a home buyer who would like to know more about home warranties and the home purchase process, contact a reputable real estate professional in your area. Your real estate professional can give you more information that can help you make an informed decision when buying a home.