Title Tip: How To Choose a Home Warranty At Closing

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By Lydia Blair
Special Contributor

Home buyers often like the sense of protection they feel when getting a home warranty on the property they are buying. Until they discover their home warranty is much less effective than expected.

Seasoned and savvy buyers know that a home warranty policy offers limited coverage. They aren’t all-inclusive. In my opinion, some are kind of useless.

Why hate on home warranty companies? I order a lot of home warranty policies as part of my job. And I’ve had home warranty policies on my own properties. Seems like we all have stories of rejected claims and paltry payouts.

Most homeowners who get a home warranty policy do so at the time they purchase a home. Sometimes they negotiate for the seller to pay for a one-year policy as part of their purchase contract. That may be the best reason to get one.

“Any person can buy a home warranty in most cases,” says Julie Jones, Vice President of Real Estate Sales for Nations Home Warranty. “There are different plans and different pricing. You might get your best deal if you’re getting it at the time you are buying a home. “

Just what are home warranties and what do they cover?

Julie Jones of Nations Home Warranty and Lydia Blair of Allegiance Title

A home warranty is also known as a Residential Service Contract. Residential Service Contracts cover a wide range of systems including appliances, plumbing, electrical, heating, cooling, pools, and water heaters. They are intended to repair or replace an appliance or system when there is a mechanical failure due to normal wear and tear. They may cover a lot or a little. It depends on the company and the annual coverage you purchase.

“A home warranty policy basically covers mechanical failures,” Jones says. “Many home warranty companies also offer option coverages outside of mechanical failures such as rekey services, pest control, carpet cleaning. “

There are actually a few good reasons to get home warranty coverage. A new homeowner may use the property in a different way than the previous owner. Kitchens, bathrooms and appliances tend to be used more or less frequently by different families. You may run your heater, AC or utilities differently than the former occupants. This may cause stress on some systems.

“Homes get used to a certain rhythm. Things change when different people move in,” adds Jones. “And when you’re buying a used house, all you have is a home inspection and seller’s disclosure to tell you about the home.”

In Texas, home warranty companies must be licensed by the Texas Real Estate Commission. A visit to the TREC web site shows the 50-plus licensed Residential Service Companies in Texas.

A handful of these companies are based in Texas. The only reason this carries weight with DFW consumers is the location of the call center. When your AC goes out in July, would you rather dial up someone in Dallas, out of the state or out of the country? “Our entire operation is here in DFW,” Jones states.

Keep in mind that a residential service contract is not homeowner’s insurance. Homeowner’s insurance covers loss to your home and property as a result of theft or perils like hail, wind and fire. They don’t cover appliances or household systems due to mechanical failure or normal wear and tear. A residential service contract can cover those types of losses but it will not cover damage to an appliance or system caused by those perils like fire, tornado, etc.

Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Allegiance Title at Preston Center, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.

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