A home warranty, or a home protection plan, is a type of insurance that covers a home’s mechanical, electrical, and plumbing systems, as well as some appliances. These are items that aren’t typically covered by a homeowners insurance policy. Once the warranty is in place, if a problem arises with an item that is coverage, the policy hold simply makes a phone call to the warranty company and they’ll send out a repairman. They will either repair the item, or if it can’t be repaired, they’ll replace it. Standard coverage on a home warranty might include the following:
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Who pays for a home warranty and how much does it cost?
It is customary around the Greater Cleveland area for home sellers to pay for the home warranty, although if a seller is unwilling, a home buyer can certainly pay for a warranty themselves. It will become part of the closing costs for whichever party is paying for the coverage. In Northeastern Ohio a home protection plan can run anywhere from $370 to $425. The companies providing the loan typically base their coverage rates off of the homes square footage, whether or not it’s a single family or a multifamily home, and if there are any additional coverages needed (extra hot water tank, in ground swimming pool, hot tub, etc). If a claim is made, the policy holder will be required to pay the deductible, which is usually between $75-$100. You’d have to reference your service provider’s policy for specifics.
Are they worth it?
It depends. Some listing agents will push their sellers to offer buyers a home warranty with the house. The think it will make the house more appealing, particularly to a first time buyer who may have little experience maintaining a home. I personally don’t agree with that viewpoint. If a buyer wants a home warranty, they’re going to ask for one regardless of whether or not the seller is offering it. If the numbers make sense, then sure, paying the extra $400 to get the deal done probably makes sense. But why offer it automatically if it may not matter to the buyer. I’ve never seen a situation where a buyer picked one house over another because they were offered a home warranty. If repair concerns come up after a home inspection, that’s a very good time to offer a warranty in order to calm any fears that the buyer might have.
If you’re buying a house, why not ask for a home warranty? Even if you don’t feel the need for the coverage, you can use it as a bargaining chip and pull it off the table later. If it’s a throw in, then great, now your major house components are covered for a year, so it’s some added peace of mind.
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