By Walt Harvey (R), ABR, CRS, GRI, SRES, ePRO
When you buy or sell a home or a condominium, you’re given an opportunity to purchase a home protection plan or a one year home warranty. For a cost of about $400, you can buy an insurance plan that covers certain systems in the home for the first year you own it. If the dishwasher or garbage disposal breaks or the water heater fails, you simply call a toll-free number and a contractor will make a house call and either repair or replace the broken appliance. You pay for the service call (about $50) and usually end up with a new appliance. Pre-existing conditions are not covered.
In addition to the built-in appliances, most home warranty plans also cover the plumbing and electrical system as well and some even have a roof option. At the end of the one year period, some warranty companies will give you the option to renew for another year.
So if everything is in working order at the close of escrow, why purchase a home warranty and who should pay for it? The first part is easy, even a relatively new appliance can fail during the first year and the peace of mind of knowing who to call and that the cost will be about $50 has value. The second part is negotiable. Granted, a home protection plan benefits the buyer but isn’t there a seller benefit as well? If a water heater fails right after the buyer moves in, the buyer may claim an undisclosed defect. With a warranty in effect, the buyer calls the warranty company instead of their attorney or their real estate broker. This is a benefit to the seller. For that reason, I encourage the seller to offer a home warranty. Plus, that seller can elect to have “seller’s coverage” for about a dollar a day and be covered if something breaks during the listing or escrow period.
Walt Harvey is a real estate broker with East Oahu Realty and works with his wife Arla. They specialize in residential, commercial and investment real estate and can be reached on their website: www.coastalhawaii.com. Have a real estate question? E-mail us at walt@coastalhawaii.com or call 375-8959.
Published in Small Business News, January 2005