ANDY'S CONSUMER TIP: home warranties - WMC Action News 5 - Memphis, Tennessee

ANDY'S CONSUMER TIP: home warranties

ANDY'S CONSUMER TIP: home warranties

MEMPHIS, TN (WMC) -

After a surge of emails from inquiring viewers -- and after the sale of my own home -- I think it's time to revisit where I stand on home warranties. My stance is the same as it has been for years: avoid home warranties except as an incentive to help sell your home.

Atlanta-based consumer watchdog Clark Howard said that's the only good thing about owning a home warranty. It might help sell your home, but if you're staying put, Howard said a home warranty's protections are limited.

"Home warranties aren't worth the paper they're written on," Howard said. "If something goes wrong in your home, the warranty companies are brutally difficult to deal with. They require you to use their contractor only. That contractor may or may not come on schedule while you're burning up in the heat of summer without AC or freezing in the dead of winter without heat. And then you've got a deductible on top of that!"

New home warranties are typically 2/10 warranties. That means solid protection on your major systems for two years, then minimum protection for 3 to 10 years after the date of purchase. On used homes, Howard said the warranties are typically 1-year renewable warranties. They cover heating, air conditioning and major electrical & plumbing systems.

But here's the thing:  Angie Hicks, founder of the service company review site Angie's List said home warranty companies are only as good as their authorized contractors. If the company partners with unlicensed contractors or contractors with poor Better Business Bureau histories or with lousy reputations on Angie's List, you could have a mess on your hands.

That is, if they even show up.

"Remember, (the warranty companies) make the repair and replace decision," Hicks said. "A lot of times, consumers get frustrated with that because they might say, 'I'm going to live in the house 10 years, and I'd like to just go ahead and put a new water heater instead of kind of making it go another year or so.'"

So Howard recommended an alternative: set aside $50 a month in a repair fund. Tap into it instead of a $400 to $600 annual warranty when major things start to fall apart.

Remember I said I sold my house. I never carried a home warranty. But strategically, I added one to my home while it was for sale. I had a dual oven. The top oven was no longer working. Instead of shelling out a few hundred dollars to repair it, I added the cost of the home warranty into the sale price of the house. That way, I didn't have to pay cash out of pocket for a new oven -- and my buyer can execute the warranty to cover the repair. 

Cha-ching!

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