Is a Home Warranty Worth It? We Crunched the Numbers for You.

After budgeting how much to spend on a home, buyers can be thrown for a loop when asked if they’d like to add a home warranty at closing. An extra expense can seem like a lot — especially when its benefits are not clear. But the truth is that in some cases, a home warranty can actually save money and offer great peace of mind. If something goes wrong once the keys are in hand, having a home warranty makes repairs affordable.  

If you’re in the process of buying a home and wondering “Is a home warranty worth the money?” we have answers. 

What a Home Warranty Typically Covers

While homeowners insurance policies cover structural damage to the home itself and loss of personal possessions in a natural disaster, they don’t cover the cost of repairs if a major appliance or home system breaks down. A home warranty provides discounted repair and/or replacement services for large household appliances such as refrigerators, dishwashers, and washing machines. It also covers repairs to the plumbing system, electrical system, and HVAC system.  

Some home warranty companies offer extra services for an additional fee, such as pool maintenance and minimal roof repairs. 

Is it Worth Getting a Home Warranty?

To determine whether a home warranty is worth it, homeowners should consider the expected monthly payments vs. possible unexpected costs. Home warranty plans can range from about $30 to $100 per month or more, which adds up to an annual cost of $360 to over $1200. Plus, each time a technician performs a repair, there’s usually a service fee of $75 to $125. 

When comparing the maximum yearly home warranty cost to the cost of what might need to be fixed or replaced within the year, those monthly payments might be worth it. For instance, a new refrigerator is around $1,000. The average HVAC repair is $400 or more. If the refrigerator breaks down in the same year as the furnace needs to be fixed, a homeowner could be forking over $1,400 in cash or racking up charges on a credit card.

But if that homeowner has a home warranty, all they have to do is make a claim and those charges will be covered. Budgeting for regular monthly payments is much easier than having to spend a big chunk all at once. 

Benefits to the Buyer: When a Home Warranty is Worth It

Since unexpected repairs are so…unexpected (which means they might not happen at all), it can be tough for buyers to decide whether to invest in a home warranty. There are several situations in which this type of contract could be especially beneficial. 

Buying an Older Home 

Homes built within the last decade or so may have appliances and systems still under warranty. For example, LG offers 10-year coverage on refrigerator compressors, and Amana offers a 10-year limited parts warranty on all systems. Much of the time, those warranties transfer to the new homeowner. 

However, when buying an older home, there’s a good chance that the plumbing, electrical, and  HVAC systems are older and will probably require repairs. And unless the previous owner of an older home recently replaced the appliances, they could soon be on the fritz too. Purchasing a home warranty could minimize big-ticket out-of-pocket repairs or replacement costs. 

Limited Savings 

Homeowners who have substantial savings and can afford unexpected repairs might not need a home warranty. But for those who have trouble coming up with thousands for a new furnace or fridge at the drop of a hat, paying a little bit each month is a more affordable option. 

No Handyman in the Household 

For homeowners who aren’t great at YouTubing plumbing problems, or don’t want to spend time searching for a reputable contractor, it’s worth getting a home warranty. After simply filing a claim (usually by phone or online), the company will find a qualified technician in the area and schedule repairs.  

Are Home Warranties a Scam?

Many trustworthy companies offer home warranties. Those are the ones that realtors recommend, and the ones that are not out to scam homeowners. In fact, buying a reputable home warranty can actually protect buyers from scams. 

Let’s say a seller who knows the dishwasher is about to go out fails to disclose it, just to make a sale. A home warranty provides protection to the buyer because it guarantees that even if something goes wrong after closing, they won’t be left with an expensive repair.  

That’s not to say there aren’t companies out there that try to scam homeowners. They often send high-pressure letters in the mail claiming to be affiliated with a mortgage company, stating that “your home warranty is about to expire.” Or they call homeowners trying to convince them to provide personal information to extend their coverage. A reputable home warranty company doesn’t pressure anyone. They just offer their services, and if buyers are interested in signing on, they’re happy to help. 

How Do I Know if It’s Worth Getting a Home Warranty?

You can take several steps to determine if a home warranty is worth the money in your situation.

Verify the Age of the Home and Any Updates

Your realtor will be able to give accurate details of how old the home is and whether the electrical, plumbing, and HVAC systems have been updated. That can give you an idea of whether or not major repairs are likely to be needed in the near future. 

Ask the Seller for Hard Copies of Existing Warranties

Newer appliances (under 10 years old) will likely still be covered by the manufacturer. Your realtor should be able to gather hard copies of these warranties and tell you whether or not they are transferable and how much longer they are active. If several of the appliances are newer, you may decide not to purchase a home warranty. 

Examine Your Savings Account

A down payment often wipes out a substantial amount of savings. After looking at how much you have left in reserve, consider whether that would be enough to comfortably pay for HVAC repairs or a new dishwasher – which could be hundreds or thousands at a time. If it fits your budget better to pay $50/per month (or whatever your preferred home warranty plan costs), it’s probably a good idea to buy one.   

Realtors at Berkshire Hathaway HomeServices Select Properties Will Help You Decide if a Home Warranty is Worth the Money and Can Recommend a Warranty They Trust

Just as each of our buyers is unique, so are their financial situations and the homes they choose. Our agents can help you examine the pros and cons of buying a home warranty and offer advice as to whether it makes sense in your case. 

At BHHS Select Properties, we recommend HSA, a home warranty company that provides superior customer service and has strong relationships with the best technicians in the St. Louis area. HSA offers valuable protection that provides peace of mind for many of our clients. We’re happy to pass along their information and tell you why they are our preferred partner! 

Whether you have questions about home warranties or the home-buying process in general, just contact our office.