Home warranties have grown popular, in recent years, especially for first-time home buyers who don’t have extra cash to handle unexpected home repairs. A popular home warranty, used by several local brokers, costs $470 – $700; depending on the coverage, for one year. In addition to the initial fee, there is a service call fee of $75 for each repair visit.

  Most first-time home buyers don’t have extra cash at closing to purchase a home warranty, as it costs $630-$700 to get appliance and mechanical items covered. The cheapest warranty for $470 has very limited coverage.

  A home warranty is not a replacement for a home inspection, which costs the buyer about $450. The inspector can identify problems that need repair, which the buyer can ask the seller to take care of. In some cases, the seller will refuse to make repairs or may reduce the price in lieu of repairs. To help the buyer deal with future repairs, the buyer can ask the seller to pay for a home warranty. In most cases the seller will agree, in order to get the sale closed. If the seller refuses, the buyer can purchase a home warranty.

 Some sellers offer a home warranty to help sell a house faster and for a higher price because it provides the buyer with perceived protection against the unknown. The seller may elect seller’s protection in addition to protection for the buyer. In this case, if a breakdown occurs prior to closing, the repair will be taken care of with a service call fee. I have seen water heaters, dishwashers, microwaves, and garbage disposals break down after the inspection and before the closing, which the seller is required to repair or replace prior to closing.

  When a breakdown occurs, the homeowner files a claim and the home warranty provider sends a contractor to make the repair. The homeowner pays the $75 service call fee and the home warranty company pays for the repair or replacement. There are limitations for some repairs, and if replacement is needed, it will be for an equal or lessor model, depending on the coverage.

  When buying a newly constructed home, you probably don’t need a home warranty as many repair defects are covered by warranties for 2-10 years. 

  Read the fine print when considering a home warranty and check the online reviews. I have had several clients read the contract and ask the seller for a $700 credit instead of purchasing the warranty and I have had many clients purchase a home warranty and they got new appliances, air-conditioners, or repairs.

  An experienced real estate agent can help you weigh the pros and cons of a home warranty.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.