Homebuyers remain at a standstill, chasing homes amid soaring prices.
The average price per square foot in Chicago has increased by more than 25% over the past year. In Salt Lake City, the average price per square foot has increased by more than 20%. In Dallas, the price per square foot has increased by more than 25% in the past year. And let’s not even talk about what’s going on in the coastal towns.
This has led buyers to do whatever it takes to stand out in what they perceive to be a bidding war. The National Association of Realtors reported earlier this year that one in four home buyers did not insist on a home inspection before making a deal.
A home warranty is a lousy replacement for an inspection
To state the obvious, incurring a debt of a few hundred thousand dollars (or a lot more) without fully understanding the state of what you are buying is kind of crazy.
If you are considering giving up the possibility of a home inspection on an offer, this is your risk. But don’t be fooled by the fact that the home warranty that the seller advertised with the ad is a meaningful kind of protection.
Home guarantees: marketing for sellers
A solid home inspection will look for structural faults and give you a detailed report on the remaining life of big-ticket items like the roof and HVAC.
These expensive items are generally not covered by a warranty.
The professional association for home service contracts (that’s what a home warranty is) points out that “home service contracts are specific and do not include everything in your home and most do not cover the foundations, walls, structure or finish of the house â.
Even seemingly minor problems can be denied. A common warranty clause is that the refrigerator is covered, but the ice maker is not. Why? Because we all know how deep fried ice makers can be.
And the fine print is usually a dive into the limit of your protection. Some policies put a hard dollar limit on what they will cover to replace something, while checking off all the things that the warranty will not cover.
For example, a standard home warranty contract states in its terms and conditions in fine print that it has a maximum of $ 1,000 to cover expensive appliances such as the Viking refrigerator or the Wolf stove. The maximum liability for a broken heating system is $ 2,500. The same limit applies for air conditioning. The maximum coverage for a leaking roof is $ 500.
Or some plans require paying for additional premium device coverage. The list of “commercial / professional grade” household appliances not covered by a single standard home warranty company “includes, but is not limited to”: Gaggenau, La Cornue, Lacanche, THG Paris, Bertazzoni, Officine Gullo, Molteni, True , Dacor, Aga, KitchenAid, Electrolux, Asko, Fisher & Paykel, Five Star, GE Monogram, GE CafÃ©, Marvel, Scotsman, U-line, Alfresco, Miele, American Range, Best, Blomberg, BlueStar, Sub-Zero, Viking , Capital, Faber, Fulgor Milano, Jenn-Air, Heartland, Hestan, Liebherr, Wolf, Lynx, Smeg, Zephyr, Thermador, Ilve, Thor Kitchen, Bosch, Verona, ZLine, Chambers, Abbaka and Franke.
Also be prepared to show maintenance records for any device you want to repair. Coverage may be refused if you cannot prove that it has been properly maintained.
Even if the seller you are buying from paid the first year premium for a warranty (the annual cost can be $ 500 or more per year), if you have a problem and the warranty provider agrees to send someone one to fix it, you are hung up for the call charges. It can range from about $ 75 to $ 125. Guarantee companies choose who comes to you. You don’t need an MBA to understand that they have a business interest in getting the job to the lowest bidder.
And this all assumes that your seller has purchased a policy from a reputable guarantee company. Be careful with relying on online reviews and ratings. The Arizona attorney general recently sued a home warranty company for, among other things, posting fake five-star reviews.
Get the home inspection
Even if you decide to go the risky route of forgoing the possibility of a home inspection on an offer, your first purchase after landing the home should be a home inspection.
At a minimum, you want to know if there is something dangerous that needs to be sorted out before you start spending money on new furniture and other “unborn” items. Tip: Follow the inspector and ask for advice on the lifespan and maintenance of everything. Good inspectors will be happy to help you understand how to take care of your home.
Hope there are no surprises. But a detailed inspection also gives you a timeline for when big ticket items might need to be replaced. This gives you plenty of time to prepare. Open a new online savings account at your bank, name it “Home” if you can customize it, and set up automatic deposits to the account. Giving a specific name to an account can be a useful boost so you don’t have to touch the money for something else.
And don’t skimp on maintenance. The more you can extend the life of a device or system, the more time you have to save for its eventual replacement.
Warranties are not a substitute for a good faith home inspection.