- The Washington Times - Wednesday, February 21, 2007

Six years ago, when Staci Kellen bought her town home in Lorton, Va., her real estate agent gave her a gift she views as priceless: A home warranty. The gift was particularly valuable on Christmas Day in 2002, when Ms. Kellen’s heat went out at 8 p.m.

“The warranty company stayed on the phone with me until they could reach someone who would come out,” says Ms. Kellen. “Then the subcontractor came out at 11 p.m. to get the heat fixed.”

While not everyone with a home warranty has such a dramatic and positive experience, concern about the hassle and expense of repairing appliances, a furnace, heat pump or water heater can cause some sleepless nights.

New-home buyers are normally protected by a warranty provided by the home builder for a year or longer. Resale homes can also be protected by a warranty purchased by a home seller, a home buyer or sometimes a real estate agent.

Dee Rosenberg, a Realtor with RE/MAX Realty Group in Gaithersburg, says sellers are buying home warranties more often today as part of their package of incentives for buyers. She says some buyers will request that the seller purchase a warranty if they have not offered one.

“There’s one big advantage to sellers that sometimes sellers don’t realize, which is that if the seller buys the warranty they can use it during the listing period,” Ms. Rosenberg says. “It’s especially important to have one if they have an older home. I worked with sellers whose water heater broke during the listing, and the warranty company replaced it.”

Ms. Rosenberg says sellers need to look at their appliances and systems to determine if a home warranty program is necessary. If the appliances and systems have just been replaced or are in good shape, it may not be necessary to purchase a warranty.

Carl Knighten, CEO of HMS Tri-Region, a 27-year-old home warranty company based in Fairfax, says home warranties in the Washington area average about $400 for one year of coverage.

Mr. Knighten says HMS was founded by real estate brokers in 1980 who were looking for a way to compete with new-home sales and provide resale-home buyers with some peace of mind.

“Sellers get no-cost coverage during the listing period as long as they have made a commitment to pay for the warranty at the closing,” Mr. Knighten says. “Attaching the warranty to the listing allows the real estate agent to market the home as covered by a warranty, which then protects the buyer after the closing.”

Mr. Knighten says he views the protection provided for sellers during the time their home is on the market as an incentive for the sellers to purchase a warranty.

“The last thing you want is to have to pay for repairs while your house is on the market,” Mr. Knighten says.

But not all consumers report good experiences with a home warranty program.

Angie Hicks, founder of Angie’s List, a consumer group that provides members with access to local contractors and companies, says a recent survey of 1,768 members revealed that 32 percent were not satisfied with the service received from a home warranty.

“One of the two main reasons we found that people were unhappy with a home warranty is that they misunderstood the contract and didn’t know what was covered,” Ms. Hicks says.

“The second complaint was about the contractors,” she says. “Home warranty companies use their own list of contractors, and they choose whether to repair or replace an appliance, not the homeowners.”

Ms. Hicks says that the typical basic home warranty program covers interior appliances and systems such as heating and air conditioning, electrical wiring, plumbing, the dishwasher, water heater, stove, oven and garbage disposal. Not all warranties cover the washer and dryer or the refrigerator, but this coverage can be added. Coverage also can be added for swimming pool and whirlpool tub equipment.

“Consumers need to understand that with a warranty program, you can’t just have something fixed and then submit a claim,” Mr. Knighten says. “All warranties have a claims phone number for pre-authorization. Warranty companies have contracts with contractors, and they can deny the customer payment if they get something fixed on their own.”

The Angie’s List survey, completed in October 2006, showed that 68 percent of the members who had used their home warranty program were satisfied with the experience. Eighty-two percent of the members said they only had a general idea of the details of the contract for their warranty or had not read it all.

Although homeowner David Erdman of Darnestown, Md., has been less than satisfied with the service provided by his home warranty program, he still recommends purchasing one, especially if for people selling an older home.

“Our seller purchased a home warranty for an older home, and we bought one when we sold our home, too,” Mr. Erdman says. “A warranty is very inexpensive and gives a level of comfort, especially for the first year in a home.”

Mr. Erdman’s problems with his warranty company occurred when he used the warranty to repair a wet bar refrigerator and the dishwasher in the main kitchen.

“I felt like I was treated as a second-class citizen because the warranty company subcontracts their jobs to repair people rather than having us call the contractors directly,” Mr. Erdman says. “The repair person damaged our refrigerator instead of repairing it, and then the warranty company said they couldn’t help us because the refrigerator was not the main refrigerator in the house.”

When Mr. Erdman decided he would rather replace his dishwasher than repair it, his warranty company said they would mail him a $250 check toward the new appliance after he purchased it.

“It took two months and at least 10 angry phone calls, but I did eventually get the money for the dishwasher,” Mr. Erdman says.

Mr. Knighten says both buyers and sellers need to understand what a warranty program is designed to do.

“Warranty programs do not provide any structural coverage, they only cover the built-in appliances in a home,” Mr. Knighten says. “These items have to be in working condition when the warranty goes into effect. People cannot plan on having the warranty replace all the appliances if they are buying a fixer-upper.”

Mr. Knighten emphasizes that the warranty program is designed to keep things working for the life of the contract, not to replace them.

“If a seller opts to buy something new rather than have it repaired, the warranty can provide a credit toward the purchase,” Mr. Knighten says. “All warranties have limitations, so consumers should read through a sample contract to be sure they understand it. You can download one online before purchasing a warranty.”

Ms. Hicks points out that consumers need to understand the details in a warranty program.

“Warranties won’t cover pre-existing conditions,” Ms. Hicks says. “They also won’t cover improperly installed or improperly modified systems or appliances or one that is damaged through something other than normal wear and tear. The warranty also won’t cover consequential damages caused by the failure of a system or appliance such as the damage to a hardwood floor caused by a plumbing leak.”

Consumers, especially during the sometimes overwhelming home-buying process, sometimes do not understand the difference between a home inspection and a home warranty.

“Just because something came through as OK in the home inspection doesn’t mean it is covered by the home warranty,” Ms. Hicks says. “Home inspections and home warranties are two entirely different things.”

While home warranty companies are licensed in some states, they are not regulated in Virginia, Maryland or the District, Ms. Hicks says.

“It’s important to use a home warranty program which is a member of the National Home Service Contract Association (NHSCA), which requires members to use local contractors who meet state and local licensing regulations,” Ms. Hicks says.

Mr. Knighten points out that most warranties are renewable, and customers are simply invoiced at the end of the year to see if they want to extend the program.

“Some homeowners do choose to extend the warranty, but, for the most part, warranties are meant to provide peace of mind for buyers,” Mr. Knighten says. “When you are buying a resale home you realize that someone else has used these appliances for as long as they have lived in the house. After the buyers have lived in the house for a year, they will know whether a warranty is needed or not.”

Ms. Kellen has renewed her home warranty each year for the past six years since she purchased her home, using it to repair her water heater, furnace, washing machine and more.

“There has only been one year where it didn’t pay for itself. However, the reassurance of ease of mind I had knowing it was there was still worth the money,” Ms. Kellen says.

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