Helping Agents Help Buyers
We’ve written helpful articles before, typically aimed at helping brokers with their agents. But what about helping agents with their clients? Selling a home warranty to a buyer is a hot topic that we felt worthy of discussing. Buying a house is the most expensive thing the average American will ever purchase. It’s only natural that people want to protect their investment as best they can.
However, understanding the value of a home warranty verse homeowner’s insurance can be a confusing topic. Some folks think that one cancels out the other or they just simply don’t know the difference between the two. It’s vital that you understand how to address the concerns of your clients when they come to you, moments before closing, with an array of questions. The following post breaks down the top four questions consumers often bring up so you can be better prepared. Read on and by the end, we promise you’ll be ready to articulate the value of a home warranty to anyone.
1. Is a warranty the same as insurance?
Home insurance covers things that happen to the home — unfortunate events such as weather damage, fire, or theft. Whereas a home warranty covers natural wear and tear or defects on listed items that came with the home — such as major kitchen appliances, water heater, AC, etc. Consider the analogy of buying a car. When you purchase a car you must also purchase auto insurance. The insurance protects you against accidents. However, the manufacturer likely has a warranty, typically for the first year of ownership, to protect you against defects. The warranty allows you to bring your car into an approved repair shop when something goes wrong with the car. Home warranty and home insurance work the same way — two different coverages for two different ways that life comes at you unexpectedly.
2. What does a warranty cover?
Any newly purchases house needs a home warranty, be it a brand new build or an older home. Homes are more than just walls and a roof. They have electrical outlets, plumbing, stoves, and fireplaces, etc. These things can be incredibly expensive to repair. For example, the average HVAC repairs cost around $400 a year. Furnace repairs can be as pricey as $800 a year. These are things homeowners want covered to drastically cut down those potential expenses. A home warranty often covers water heater, electrical, and plumbing defects that weren’t caused by the new homeowner. That said, it’s important to review the details of any warranty, as it may not cover every single thing that comes with the house. Home warranties will often list these exceptions in the fine print.
This is why it’s also important to review every home inspection before the deal closes. You should know that many home warranties likely won’t cover repairs to the chimney, even if the home inspection notes that there are cracks in the mortar. When you understand home warranties, you are better able to negotiate during the inspection process and help ensure a smooth post-close experience for your clients.
3. How does home warranty coverage work?
A home warranty protects homeowners from unexpected expenses that are outside of their control. An inspection will note all the components of the home and whether they are functioning properly. So when the built-in microwave stops working, the dishwasher springs a leak, or some of the bedroom outlets stop working, the homeowner can call their home warranty provider and get the necessary repairs. Generally, a warranty charges homeowners a flat rate to fix any covered items. However, warranties do not include misuse or abuse. For example, if the homeowner has the exterior of the home pressure washed and the AC unit is broken in the process, it would not be covered. It’s important to understand not only what is covered under the warranty but to makes sure your client also understands the conditions of the warranty.
4. Will you really save money with a home warranty?
Research shows that on average a $200,000 home will require at least $2,000 in repairs and maintenance expenses alone. This expense will go up with the age and value of the house. Your buyer might wonder how an expense now saves them money later. Well, here’s a scenario: shortly after moving in your client starts noticing that the water in the toilet is warm which is unpleasant but also really weird. They have a plumber come out to inspect, and he discovers that a pipe was routed incorrectly and thus they’ve got a hot water line feeding into the back of the toilet.
To fix it, the service provider has to go under the house and redo some connections. When all is said and done, repairs like this are quite expensive due to parts and labor. Whereas, if the homeowner had used their home warranty, the entire visit would have cost somewhere in the neighborhood of $60 regardless if it was a 20-minute fix or a 4-hour operation. It’s like having a smartphone warranty to protect against loss or theft. Your provider replaces your phone for a $150 deductible. Without the warranty, you would likely pay upwards of $1,000 for a new phone.
Spend a little now, save a lot later. At the end of the day, that’s the motto of a lot of aspects of home buying, especially home warranties. Think of it as investing in the systems that come with the home. Assure your clients that they are protecting themselves from the unexpected things that often come up when purchasing a home. The defects in a faulty product, the consequence of a job someone else didn’t do quite right, and the random failings outside of your client’s control. Why not be protected?
Buying a house is a big deal and so is protecting it and everything inside it. We hope these four points help you better sell the value of a home warranty to your next buyer! If you’re interested in learning more about ordering and processing Home Warranties and Natural Hazard Disclosures orders from within SkySlope, contact your account manager or sales rep today.