Should Tahoe Home Buyers get a home warranty?

You’ve found the perfect Tahoe Mountain home, condominium, or townhouse and you’re ready to make an offer.  One of the questions your Tahoe REALTOR® will ask you when preparing your purchase contract offer is do you want a Home Warranty for your property?

It’s such a common question that our California Association of REALTORS® (CAR) has included a specific provision in the residential purchase contract that addresses the Home Warranty item:

• Who pays for the Home Warranty – Buyer, Seller, Split with both paying
• What company is selected for the Home Warranty Policy
• Standard or Upgraded Policy
• Optional Coverage Items that the purchase contract reminds Buyers they can add on: A/C (Air Conditioning), Pool/Spa, or something else like extra refrigerators, well pump, septic, saltwater pool, guest unit, washer/dryer.
• Buyer waives the purchase of a Home Warranty Plan (This help to remind everyone that a Home Warranty Plan is available for Buyers if they want, or don’t want one.)

Depending on the Home Warranty company the list of what is covered can be extensive.

Should Tahoe home Buyers get a home warranty?  In general I would say yes, it’s a good thing for a new home owner in the greater North Lake Tahoe – Truckee area to have for their first year of home ownership.

A reason to not get a Home Warranty is you know you’re going to do extensive remodeling, or know that the life expectancy on the major components are coming to an end, and you are okay with handling everything yourself.

Another reason to not get a Home Warranty is you know you’re going to be in a multiple offer situation and want to make a clean offer without the Home Warranty expense included.  You know you can add that later at your own expense, but you want your offer to standout without this section being filled in.

Here are some more details and information.  Let’s start with some basics.  What is a home warranty and what are the advantages and limitations of a typical policy.

What is a Home Warranty?  A home warranty is a one-year service agreement that covers the repair, or replacement of many major home system components and appliances.

There are typically different levels of coverage offered from a home warranty company, and each will come with a different price tag.  Most companies have two basic categories:

• Single family home dwellings policies
• Condominium/Townhouse policies

Depending on the property type there will be different levels of coverage and different options.

Here are some of the types of systems and appliances that a Home Warranty Plan can cover:

• Air Conditioning (A/C) including ductwork
• Heating including ductwork
• Electrical, Plumbing
• Water Heaters
• Garbage Disposals
• Instant Hot/Cold Water Dispensers
• Central Vacuums
• Smoke Detectors
• Doorbells
• Ceiling Fans.
• Refrigerators
• Dishwashers
• Clothes Dryers
• Clothes Washers
• Ranges/Ovens/Cooktops
• Built-in Microwave Ovens
• Free-standing Ice Makers
• Trash Compactors
• Garage Door openers
• Built-in Food Processors.
• Pool/Inground Spa
• Well Pump
• Septic System pumping & septic ejector pump
• Portable above-ground Hot Tubs

*The items covered, or additional items that can be covered will vary by Home Warranty Company.  Larger homes, may require an enhanced policy to cover larger systems.  Check with your REALTOR, or Home Warranty company to make sure you have the right coverage for your specific situation.

The primary benefit to a home, or condo buyer getting a home warranty as part of their real estate purchase is having the comfort in knowing that if a major appliance, or mechanical component that is covered breaks down, you have a service agreement in place that will help you through the repair process.  If repairing isn’t possible, then there will be some financial assistance in replacing the item.

Cost:  There are two parts to the cost of a Home Warranty policy.  There is the Policy Fee and the Trade Service Call Fee.

• Policy Fee – The initial Policy Fee is paid at closing. If you choose to extend the coverage at the end of the initial term, you will pay for the next year of coverage, so there can be an on-going annual policy fee.  In the North Lake Tahoe – Truckee area an upgraded home, or condo warranty policy will cost less than $1,000.
• Cost of the Home Warranty – The cost of the Home Warranty plan will be reflective of the policy selected along with the option add-ons.
• Trade Service Call Fee – If you need to have something repaired, then when you make a request for a service call, you’ll pay a Trade Service Call Fee. Typically the Trade Service Call Fee, which can range from $50 – $125, depending on Home Warranty Company selected.

The reality of home ownership is at some point in time, a breakdown of a system or appliance will happen. The question is when, and how will you handle the cost of that repair?

A Home Warranty plan is an easy way to help manage, or supplement the cost of the repair/replacement, along with knowing that professional help and support can be sent to your home quickly.

Another common question I am often asked is:

What is the difference between a Home Warranty and Home Insurance?

• Home Warranty is a service agreement on an identified list of covered items for a defined period of time typically one year.
• Home Insurance is an annual policy that is designed to cover a catastrophe.

For example:  Your home has a fire and your built-in microwave is destroyed.  Your home insurance is designed to cover that loss.

The same built-in microwave stops working on a Tuesday night for no apparent reason, if you have a home warranty plan, that service agreement will cover that item, not your home insurance.

Why purchase a Home Warranty during your real estate purchase?  Home Warranty companies offer special pricing if the Home Warranty policy is purchased during the transaction because they know what was working on the property before the policy goes into effect.

Buyer Tip – Pre-Existing Conditions – If you know the refrigerator is not working, and this is noted in the home inspection report, or it is not working when you do your final walk-through prior to closing, Buyer beware, most Home Warranty companies will not cover the repair as it was the sellers/previous owners responsibility to fix the item.

It is important that everything be in working order on the day you close.  Your Home Warranty will not cover items that were broken, or not working before you become the owner. 

How do Home Warranty companies know what was working and what wasn’t?  Home Warranty companies will ask to see a copy of the Home Inspection Report, or a copy of your final-walk through.  Home Warranty companies will want to know what you checked on right before you closed.

Buyer Tip – Read the fine print.  There are limitations on the size/capacity of systems, and what is actually covered.

The cost of access is not covered.

• For example: A ceiling fan that was located 30’ from the floor in the center of the room. The electrician needed to fix the ceiling fan, and his cost and the fan were covered by the Home Warranty plan, but the cost of the scissor lift (cost to rent and transport – a scissor lift is an alternative to scaffolding, or ladder) were not.  That cost to access the ceiling fan was an additional $400.
• Another example of access. The shower facets stop working.  Opening up the back of the shower wall, and then repairing the drywall, or going through the tile and then repairing/replacing the tile is not covered. The additional costs to tear the wall apart and then make the necessary repairs are not covered.  Only the actual plumbing repair is covered.

Know the cash-out limits.  If you have a designer appliance, like a Viking range, and it can’t be repaired for whatever reason, the Home Warranty Company will not replace that range with a new Viking range.  They will give you the cash out maximum for that appliance.  Most Home Warranty plans limit appliances to around $3,000, but it will vary depending on the Home Warranty Company.

Buyer Tip – Home Warranty companies have not priced out their plans for the designer appliances.

If you want to learn more about the Home Warranty Company your REALTOR has suggested, go on-line to their website and see what they cover, their exclusion and limitations restrictions.

Not everything in the home/condo is covered.

For example in the North Lake Tahoe – Truckee area gas fireplaces, wood burning stoves, or gas-log stoves are not a covered appliance, even if they are the heat source (heater) for the property.

Buyer Tip – Check the list of Covered Item – if the appliance or system you are concerned about is not on the covered list, it’s not a covered item.  Home Warranty companies are quick to show the list of covered items on their marketing materials.  There is no secondary list of additional items covered.

Buyer Tip – Negotiate and Ask for the Seller to pay for the Home Warranty Policy – In the North Lake Tahoe – Truckee area who pays for the Home Warranty policy is a negotiable item.  In some areas Sellers typically pay, or Buyers typically pay, but in our area it really is a negotiable item, so unless you are in a multiple offer situation, ask the seller to pay for the home warranty.   More often than not, Sellers are willing to pay for a Buyer Home Warranty plan, or split the cost with the Buyer.

Home Warranty plans are a great way to provide a Buyer with some confidence in your home, or condo purchase here in the North Lake Tahoe and Truckee area.  As with all coverage/service plans  there are limits, so know the rules upfront on what is covered and their financial limits on services/replacement costs and you’ll improve your Home Warranty experience.

Real estate is local, so one of the big benefits of choosing a Home Warranty company that is popular and being used by many local real estate agents is they have an extensive and established local network of contractors and service providers that are familiar with the local area and rules/regulations making it possible for them to react quickly when you have a problem and need something fixed right away.

Want to learn more about Home Warranty Plans, check out American Home Shield and their program.

Most Tahoe Home Buyers should seriously consider including a Home Warranty as part of their real estate purchase.

Tahoe home and condo buyers have questions about our area and the buying process.  Learning more about Home Warranty plans and how they may benefit your purchase is just one item.

Need more help in trying to figure out your Lake Tahoe – Truckee home/condo buying options? 

Do you want to learn more about the different neighborhoods, locations, developments and their amenities, HOA fees and the ones that will best meet your needs?  Call me at 530.414.1260 and I can help you find the right place to buy!

Thinking about making Lake Tahoe, California your second home? Check out the homes that are for sale here:

Want to see what condos are for sale in Lake Tahoe? Here are the current listings:

• Tahoe City Homes for Sale
• Tahoe City Condos for Sale
• Tahoe City Lakefront Homes for Sale
• Lake Tahoe Lakefront Homes for Sale
• North Shore Lake Tahoe Homes for Sale
• West Shore Lake Tahoe Homes for Sale

For all of your Tahoe real estate needs –

Laura A. Allen | 530.414.1260  | Laura@TahoeLaura.com
BROKER ASSOCIATE, Tahoe Real Estate Agent
CalRE# 01473598
Coldwell Banker, Tahoe City, CA CalRE#01908304

All information is deemed reliable, but is subject to change, and/or correction without notice.

Should Tahoe Home Buyers get a home warranty?