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The Struggle with Home Warranty Companies and your Rental Home

home warranties

We wanted to write this article for any homeowners with existing home warranties or are thinking about getting one. Our team is having an increasingly hard time working with home warranty companies, please read this article in full.

As we are writing this, Lindsay, one of our property managers, is on the phone with American Home Shield and listening to a recording that says “your wait time is in excess of one hour. Please continue to hold and a representative will be with you.” She is merely trying to follow up on a work order that was recently placed.

While we understand that using a home warranty for repairs can be beneficial for you, we have experienced that home warranty companies make it difficult to provide quality service to your tenants. We have gathered input from our staff and other industry experts on the pros and cons of having a home warranty. Here is some of our findings.

What is a home warranty?
A home warranty is a pre-paid, 1-year service contract with a warranty provider that agrees to repair or replace certain items in your property during the contract term. It is not the same as insurance for your home, but it can provide some piece of mind to homeowners on a budget in case major components in your home need to be repaired or replaced. The main areas that home warranties cover include electrical, plumbing, heating and air, and appliances. It does not include coverage for major items like your roof or foundation.  

How does it work?
While prices for home warranties vary by provider and packages, we see the average home warranty at a cost of $550 per year or $46 per month. Keep in mind, an additional service trade fee is still due at the time of service which is between $50 and $100 for each request. If your tenant calls in an issue with the front light and the dishwasher on the same day, the warranty company will send two different vendors and charge two trade fees.

Pros of home warranties for landlords:

  • Can help manage the cost of repairs on what the warranty covers
  • We tried really hard to think of more pros, but honestly we’re falling short!  

Home warranties can be advantageous for new homeowners especially in providing peace of mind. The older your home and its components, the more likely you are to find value in a home warranty. We don’t find that homeowners get the same value in newer properties where repair costs are low. The good news is that the warranty company should take care of the item with no additional charge above the warranty and trade fee call for a normal service repair (i.e. appliance repair, hot water heater repair, etc.)  

The only positive feedback we received is that a home warranty can bring a large return on big ticket items, such as water heaters and new HVAC units. Costs for the owners are fractions of the full price that you have to pay if you do not have a warranty.

Cons of home warranties for landlords:

  • Delayed time for service
  • Does not include preventative maintenance or turnover expenses
  • Home warranties will try to repair over and over again to delay replacement, if at all possible
  • Each policy comes with a long list of exclusions as well as it does not cover anything they consider to be “pre-existing” or with “too much wear and tear”
  • Not set up to handle emergency situations
  • Certain costs are not included in the warranty
  • Can just be a "waste of money" if not used or big repairs do not happen

Delayed time for service
The most negative impact we have found from home warranties on your tenant and our team is the delayed time for service. Inputting a maintenance request can take in excess of an hour. Most warranty companies anticipate a vendor to make contact with us or your tenant within 72 hours. Warranty companies require parts to be shipped from their warehouse and can even further delay repairs. The vendors home warranties assign rarely follow up and we never receive a copy of the work order notes from the vendor.

Home warranty situations gone terribly wrong
We’ve had some terrible experiences this summer with American Home Shield, First American Home Warranty and Old Republic Home Warranty with regards to extended delay times for service. We had two different set of tenants without air conditioner for over four weeks this summer. We had another resident with no hot water for a month! Air conditioners going out is something we try to prepared for, so our company owns three portable a/c units for instances like these. We do not charge the tenants, or you, the owner, for this service, but we cannot loan out our a/c unit for a month, nor does the unit adequately cool an entire home during summer.

Even with persistent follow up, calls to supervisors and our local reps, the home warranty company was unable to get these repairs made in a realistic time frame. To say these tenants were just upset is a great understatement and does not describe the situation well. The property owners had to offer rent credits in all three scenarios. And No, the warranty company does not agree to reimburse or care about their inadequate response. Our management team sent apology notes and gift cards to our tenants. Your tenants do not love your warranty company; Therefore, they do not likely love you (or us).

Another example of a bad experience with home warranty companies comes from one of our homeowners with Choice Home Warranty that was refused a new outside unit even though their vendor stated the unit needs to be replaced. We’ve paid three service trade fees this year and despite the cost of the home warranty, the homeowner is getting estimates to replace the unit outside of the warranty. This is unfortunately more common than the warranty companies would like to admit. They are a business and are here to make money. They will delay replacement as long as possible and then can find a reason not to replace.  

After-Hours Emergencies and your home warranty
Another grave concern regarding the warranty companies and your rental property is that the warranty companies are not set up to manage after hours and emergency services. If you have a home warranty and there is an emergency on the weekend, we will need to work outside of your home warranty. The best example of this is a plumbing emergency. Your home can suffer extensive water damage if a plumber is not dispatched immediately. If we have to shut the water off to the home for an extended period of time in order to mitigate damages to your home, you may be liable to pay for hotel reimbursement for your tenant while you wait on the home warranty. In these instances, you are losing money using the home warranty and it makes more sense to pay outside of the home warranty. Our company has a great relationships with our vendors. Most can provide same day service and will go the extra step to take care of emergencies. You won't have that with home warranties.
 
To sum it up, time is money
Tenants who wait extended periods of time for normal service are unhappy and an unhappy tenant will cost you. It is our goal to ensure all owners and tenants are happy with service and response times are critical in this satisfaction rating. 

If you choose to have a warranty - We need your help
We are willing to work with your home warranty; However, we will need the following assistance from you in order to make it work.

  • If you receive a phone call or email from the home warranty company, you must pass along that information to us as soon as possible.
  • If you make payments directly to the home warranty company, please send us a copy of that documentation once received and paid.
  • First American Home Warranty is now requiring the service trade fee to be paid by a credit card before the vendor will visit the property! We will need you to make this payment as not to delay service. For tax purposes, it’s best that we not place your service fees on our company credit card and bill your account. 
  • As we do not receive notifications for your plan expiration and renewal, you must be responsible for renewing your home warranty. Please check with us before you renew your home warranty so we can advise on different options and companies.
  • Before you purchase a home warrant, do your research and be an educated consumer. Customers expect more from their warranty than it will deliver. Analyze the numbers. If you pay $550, and then have an average of four work orders per year with an additional trade fee, are you likely to make money, lose money, or break even? It may make more sense to set aside money each month in a savings account. You’ll be able to access these funds for any number of reasons including preventative maintenance, turnovers, vacancy, and repairs.

Home Warranty Company Ratings on the Better Business Bureau
We investigated the ratings on the BBB website to size up all the major home warranty providers in our area. If you have a few minutes, read some of the reviews of your home warranty company below. It does not seem we are the only ones struggling with getting satisfactory service. The rating scores are as follows:

  • Old Republic Home Warranty - 3.8 out of 5  Read reviews here 
  • Home Warranty of America- 2.9 out of 5 Read reviews here
  • First American Home Warranty-  2.8 out of 5  Read reviews here  
  • American Home Shield- 2.8 out of 5 (also noted for the longest wait times!) Read reviews here  
  • Select Home Warranty & Choice Home Warranty 2.5 out of 5 (we do not recommend using these home warranty companies as they don’t have adequate service or coverage in our area)

 

Nicole St. Aubin
Realty Masters of FL~ (850) 473-3983
4400 Bayou Blvd. #58B, Pensacola, FL 32503

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11-13-2017
Nicole St. Aubin
Home Warranties
11-14-2017

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