Homebuyers – Don’t Rely On Guarantees


Home buyers remain in a difficult predicament and hunt for home with soaring prices.

The average price per square meter in Chicago has increased by more than 25% over the past year. In Salt Lake City, the average price per square meter has increased by more than 20%. In Dallas, the price per square meter has increased by more than 25% in the past year. And let’s not even talk about what’s going on in coastal cities.

This has resulted in buyers doing everything possible to stand out in 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 closing a deal.

A home guarantee is a lousy substitute for an inspection

To say the obvious, taking on a few hundred thousand dollars (or much more) in debt without fully understanding the state of what you are buying is kind of insane.

If you consider doing without the home inspection on a bid, you take the risk. But don’t be fooled, the home warranty that the seller advertised with the listing makes sense of protection.

House guarantees: Marketing for sellers

A solid home inspection looks for structural imperfections and gives you a detailed report of the remaining life expectancy of large items like the roof and HVAC.

These big ticket items are usually not covered by a warranty.

The House Service Contracts Association (which is what a house guarantee is) advises that “House service contracts are specific and do not cover everything in your house and most do not cover any house foundations, walls, structure or surface.”

Even seemingly minor problems can be denied. A common guarantee clause is that the refrigerator is covered, but not the icemaker. Why? Because we all know how sparkling ice cube makers can be.

And the fine print is usually an indication of how limited your protection is. Some policies put a strict dollar limit on replacements while ticking off things that the warranty doesn’t cover.

For example, a standard home warranty contract mentions in the fine print of its terms and conditions that it has a maximum of $ 1,000 to cover expensive equipment like a Viking refrigerator or Wolf range. The maximum liability for a defective heating system is $ 2,500. The same limit applies to air conditioners. The maximum coverage for a leaky roof is $ 500.

Or, some plans require payment for additional coverage from high-end equipment. The laundry list of “commercial / professional” appliances not covered by a standard household guarantee “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 Café, 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 provide maintenance records for each device that you plan to repair. You may be denied coverage if you cannot prove that it has been properly serviced.

Even if the seller you are buying from has paid the first year premium for a warranty (the annual cost can be $ 500 or more per year), if you run into a problem and the home warranty provider agrees to send someone to deal with the problem fix, you’re on the hook for the call charge. That can run anywhere from $ 75 to $ 125 or so. Warranty companies can choose who shows up at your home. They don’t need an MBA to realize that they have a business incentive to outsource the work to the lowest bidder.

And all of that assumes that your seller bought a policy from a reputable warranty company. Be careful and rely on online reviews and ratings. The Arizona Attorney General recently sued a home warranty company for posting fake five-star ratings, among other things.

Get the home inspection

Even if you take the risky route of foregoing the home inspection on a bid, your first purchase after landing the home should be a home inspection.

At the very least, you want to know if there are any dangerous things to watch out for before spending your money on new furniture and other nice-to-haves. Tip: Follow the inspector and ask for life and maintenance tips for everything. Good appraisers will be happy to help you get the maintenance of your home under control.

Hopefully there will be no surprises. But a detailed inspection will also give you a schedule of when to replace large items. This gives you plenty of time to prepare. Open a new savings account with your bank online, label it “Home” if you can customize it, and set up automatic deposits into the account. Giving an account a specific name can be a helpful push to avoid using the money on anything else.

And don’t skimp on maintenance. The longer you can extend the life of a device or system, the more time you have for a possible replacement.

Guarantees are not a substitute for a home inspection in good faith.

About Stephanie McGehee

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