Tom and Judy Volz moved into their Westside home last August because it had almost everything they wanted: three bedrooms, fenced yard, fireplace and a good location.
Unfortunately for the Volzes, the home also had a floor furnace that didn't work--a flaw they didn't discover until they tried to heat their house when the rainy season began.
If the Volzes had purchased their home a few years ago, they probably would have wound up paying the resulting $1,350 repair bill. But the couple's house was covered by a home warranty plan, and the only expense they will incur in replacing the furnace and repairing the wall is a $50 deductible.
Although home warranty plans have been in existence for several years, their popularity is growing, in part because buyers and sellers have become increasingly wary of lawsuits that can arise after a property changes hands. About 34% of all California home resales last year involved such a plan, compared to around 25% in 1984 and 10% in 1978. Most warranties are issued for a year at an average cost of $300. Unlike a standard homeowners' insurance policy, the warranties usually cover problems arising from normal wear and tear on a home's plumbing, electrical, heating and cooling systems. Most appliances are also covered, as are most problems with water heaters.
The warranties, however, are not insurance policies. As a result, they don't protect a homeowner from damage caused by fire, theft, vandalism and the like. Problems with wall-unit air conditioners, washers and dryers, leaky faucets, broken tile and a host of other items typically aren't covered.
Limit on Pay-outs
Pay-outs for repairs on some other potentially costly problems--such as trouble with pipes embedded in concrete--are usually limited to about $500.
The warranties have proven popular with sellers and buyers alike. In addition, many realtors are now offering to pay for policies on the homes they are trying to sell in an effort to make the house more marketable.
"Everybody has heard horror stories of people getting sued after they sold their house, but people who have the warranties rest easier because they know they've got some protection if problems crop up later," says Linda Falcon, an agent for Century 21/Medallion Realty in West Los Angeles.
Falcon and her firm purchase a warranty for each single-family home and older condominium she lists for sale.
Most homeowners buy the protection only for the first year they spend in the houses, although some firms will renew the policy for a second year at the original premium. Some builders even offer multi-year warranties on the homes they build, and the coverage is sometimes transferable to anyone who purchases the house from the original buyers.
The warranties have proven a blessing for thousands of homeowners.
"If we hadn't had the warranty when our furnace broke down, we probably would have had to buy a few space heaters," says Judy Volz. "We sure didn't have $1,350 to fix the thing ourselves."
Require Repair Estimate
Other homeowners have been reimbursed for stoves that broke, water heaters that exploded or pipes that cracked while the home was still under warranty.
Some warranty companies require a homeowner to call a repairman, get an estimate on how much the work will cost and then get approval from the company before work can proceed. These firms usually require the owner to pay the expenses and then send a reimbursement check a few weeks later.
Other firms call the repairman themselves and pay for the services directly after the owner writes a check to cover the deductible. This type of plan can work out best for owners because they aren't required to make a large cash outlay.
Companies that issue home warranties won't pay for items that were broken before the policy went into effect, although some homeowners try to mislead the firms into believing that the damage was done only recently.
Moved Old Dishwasher
"We had an investor who had an old, rotted-out dishwasher, and he'd put the thing in every home he bought," recalls Dan Langston, senior vice president of customer service for Woodland Hills-based First American Home Buyers Protection.
"He'd buy a policy on the home, wait about three months, and then call us up to complain about it being broken.
"About the third or fourth time, the technician we sent out to fix the thing called us and said, 'You know, I could swear I've seen this dishwasher before. . . .' "
Homeowners who are considering the purchase of a warranty should do some comparison shopping. Although prices don't vary much, some home warranty plans cover items that others don't, and deductibles can range from $25 to $100.
"Ask your realtor for recommendations, too," advises Phil Branson, First American's president and leader of the Home Warranty Assn. of California, an industry trade group. "The realtor should know which firms have a reputation for providing good service."
Some experts say consumers should purchase the warranties only if the property they are buying is a single-family home or an older condominium.
"Warranties for apartment buildings are pretty expensive, and I usually don't buy one for a new condo because the only thing it would cover is the appliances," says realtor Falcon. In addition, notes Branson, new homes usually come with a warranty.
Even if homeowners don't make a claim on their policies, some say the annual premium is worth the money just because they can sleep better at night. "The biggest benefit is having the peace of mind knowing that if something is going to happen, you'll probably be covered," Judy Volz says.