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HOME BUYERS FAIR : Consumer Protection : Buyer Safeguards Can Protect Home Purchases : Home Buying: Title insurance, inspections and warranties are becoming increasingly popular not only as security for the buyer, but for the seller.


Home warranties are one-year service contracts that cost $220 to $300 and go into effect when you close escrow. They cover all major mechanical systems of a house: heating, plumbing, electrical and built-in appliances for the period of the contract, according to Phil Branson, president of the Home Warranty Assn. of California. Optional coverage is usually available for central air condition, evaporative (swamp) coolers and swimming pool and spa equipment.

Home warranty firms are regulated by the state Department of Insurance.

Home warranties are a growth industry. In 1978, only 8% of the existing home transactions in California included a home warranty. Last year, according to the Home Warranty Assn. of California (HWAC), 45% of the 550,000 existing home transactions came with a warranty.

Last year's sales of existing homes dropped more than 4% from 1988 levels, according to the California Assn. of Realtors, but the number of home warranties sold increased by 7.2%, the HWAC reported.

A deductible or service fee--which varies from contract to contract but averages $35--applies to each service call. Companies usually have a toll-free telephone number to make claims and obtain repairs or replacements, Branson said.

The warranty can be renewed at the end of the year; 20% to 25% of the buyers renew at the expiration of the original contract, he said. Home warranties can be purchased through a real estate broker or from the warranty firm.

In the past, home sellers and real estate brokers bought warranties as marketing tools, to give the house an edge on the competition, Branson said. Today, however, more than half the warranties sold are in response to a demand by the prospective buyer as a condition of buying, with the seller paying for the contract.

Current members of the HWAC are American Home Shield Corp., Santa Rosa, Calif.; Buyers Home Warranty Co., Burbank; Continental Home Services, Walnut Creek, Calif.; Electronic Realty Associates Inc., Shawnee Mission, Kan.; First American Home Buyers Protection, Woodland Hills, and Hisco Home Protection Plan, Dublin, Calif.

The National Home Warranty Assn. represents seven companies--two of which are members of the HWAC--according to Donald J. Sleezer, association president and president of the Hollywood (Fla.)-based Homeowners Marketing Services Inc. The other six members of NHWA are American Home Shield Corp., Consumer Protection Inc., Electronic Realty Associates Inc., Guaranteed Homes Inc. and United One Home Protection Corp.

Termite Inspections

According to Harvey L. Logan, executive vice president of the Pest Control Operators of California (PCOC), a consumer ordering a termite inspection should expect that he or she will have a "full and complete investigation of and a report on any termites or other wood destroying organisms" in the house.

His group is a trade association with about 1,100 members, representing 75% of the state's pest control industry.

Logan suggests the following when choosing a termite inspection firm:

* Ask friends or neighbors if they have used pest control services and if so, were they satisfied with the firm they hired.

* Call PCOC for a list of pest control operators in your area, (916) 372-4353.

Once you've chosen a pest control firm, Logan says, use the following guidelines to ensure a good working relationship:

* Follow all recommended preparation procedures before the treatment begins. Pay special attention to instructions regarding food preparation areas, pets and children.

* Always ask for a written estimate before any work begins and discuss the specific terms of any guarantee provided.

* Discuss the method of payment before the job begins. Is payment due at the time of application or will you be billed?

* Discuss your expectations with the pest control professional before treatment begins. Do you want pest control or a pest-free environment. Different expectations may require different treatments.

Logan also suggests that you check to make sure that alternative methods--freezing methods, heat, nematodes, electro-guns, for instance--are acceptable to lenders. An article in the spring, 1989, issue of Voice of PCOC, the organization's magazine, "A Look at New Technology for Pest Identification and Treatment" discusses the effectiveness of non-chemical treatments.

Remember, in most cases "the lender requires the seller to furnish a current termite report, by a state-licensed pest control operator, showing on the property no visible signs of infestation, fungi or dry rot in any accessible area," according to "California Real Estate Practice" by Robert J. Bond (3rd edition, Scott, Foresman and Co., 1988).

Title Insurance

A title insurance policy insures the buyer and lender--that's why lenders require it--against loss, except for noted defects in the chain of title, such as liens, mortgages or other known encumbrances.

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