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Carla Fried: Homebuyers -- don't rely on warranties

Carla Fried, Rate.com on

Published in Business News

Even seemingly small problems can be denied. A common warranty clause is that the fridge is covered, but not the ice maker. Why? Because we all know how fritzy ice makers can be.

And the fine print is typically a dive into how limited your protection is. Some policies place a strict dollar limit on what they will cover to replace something, while ticking off all the things the warranty won’t cover.

For example, one standard home warranty contract mentions in the fine print of its terms and conditions that it has a $1,000 max to cover expensive appliances such as Viking fridge or Wolf stove. The max liability for a broken heating system is $2,500. The same limit applies for air conditioning. The max coverage for a leaky roof is $500.

Or some plans require paying up for extra coverage of high-end appliances. The laundry list of “commercial grade/professional” appliances not covered by one standard home warranty company “includes but is not limited to”: Gaggenau, La Cornue, Lacanche, THG Paris, Bertazzoni, Officine Gullo, Molteni, True, Dacor, Aga, KitchenAid, Electrolux, Asko, Fisher & Paykel, Five Star, GE Monogram, GE Café, Marvel, Scotsman, U-line, Alfresco, Miele, American Range, Best, Blomberg, BlueStar, Sub-Zero, Viking, Capital, Faber, Fulgor Milano, Jenn-Air, Heartland, Hestan, Liebherr, Wolf, Lynx, Smeg, Zephyr, Thermador, Ilve, Thor Kitchen, Bosch, Verona, ZLine, Chambers, Abbaka, and Franke.

Also be prepared to show maintenance records for any appliance you want fixed. You can be denied coverage if you can’t prove it’s been properly maintained.

Even if the seller you buy from paid for the first-year premium for a warranty (the annual cost can be $500 or more per year), if you run into a problem and the home warranty provider agrees to send someone out to fix it, you’re on the hook for the call fee. That can run $75 to $125 or so. Warranty companies get to choose who shows up at your house. You don’t need an MBA to appreciate that they have a business incentive to farm out work to the lowest bidder.

And all that presumes your seller bought a policy from a reputable warranty company. Be careful relying on online reviews and ratings. The Arizona Attorney General recently sued a home warranty company for, among other things, posting bogus five-star reviews.

 

Get the home inspection

Even if you decide to go the risky route of waiving the home inspection contingency on a bid, your first purchase after landing the home should be a home inspection.

At a minimum, you want to know if there’s anything dangerous to be aware of that needs to be addressed before you start spending money on new furniture and other “nice to haves.” Tip: Follow the inspector around and ask about life span and maintenance tips for everything. Good inspectors will be glad to help you get a handle on how to care for your home.

Hopefully there are no surprises. But a detailed inspection also gives you a timeline for when big-ticket items might need replacing. That gives you plenty of time to prepare. Open a new savings account online at your bank, label it “Home” if you can customize, and set up automatic deposits into the account. Giving an account a specific name can be a helpful nudge to not touch the money for anything else.

And don’t scrimp on maintenance. The longer you can extend the life of an appliance or system, the more time you have to save up for its eventual replacement.

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