Is a home warranty worth the money?

My friends just bought a 10-year old home a few months ago.  Escrow offered them a home warranty and we discussed the pros and cons.  I recalled a case where the buyer moved into a home that was just four years old.  Within a week, the built-in microwave oven died.  The new owners paid about $55 for servicing and American Home Shield repaired the oven.

That was good enough for my friends and they purchased the home warranty.  A basic home warranty covers the major appliances for one year.  This couple paid $266 for their warranty.

I got a call yesterday from the wife.  She told me how happy they are with the warranty!  Since they bought their home in Waikele, they've had three problems with appliances.  Shortly after they moved in, the under-sink disposal failed.  A month later, the stove had problems.  Now, the dishwasher went out on them.  Each time they called American Home Shield, the technicians responded quickly and made the necessary repairs.  The homeowners' cost was $55 per repair.

If you're buying a property and plan to keep the appliances, the American Home Shield warranty can be a great investment.  Two situations where a buyer probably won't need to buy a warranty are when the purchase is a brand new home, or when the buyer plans extensive renovations, including replacing the appliances.  New homes normally come with warranties that cover appliances.  Also note, if the appliances are already broken when the buyer purchases the property, they are not covered under the warranty.  Buyers, that's a good reason to get a home inspection.

Recently I read an article where a home buyer claimed American Home Shield is a ripoff.   Basically, they had a spa heater that wasn't functioning.  The home inspector checked the light, it was turned on and he concluded that the spa heater was working.  After the purchase, the buyer learned the heater was not heating although the spa heater light was on.  American Home Shield correctly stated it was a pre-existing condition and did not pay for the repair.  The home buyer was upset with American Home Shield.  Actually, he should have been upset with the home inspector.  Home inspectors have some liability for errors.  The buyer could have followed up with the home inspector and probably would have received compensation for the mistake.

We frequently try and save a few dollars here and there when we're making a big purchase and counting the costs.  A home warranty and a home inspection are two expenditures that are generally worth the money for the investment!

Aloha, Mike Bates

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