When you work with Phoenix property management, you are able to get professional advice and support about renting out your real estate properties. One of the ways we can save our clients money is by helping you avoid home warranty companies. While they sound like a useful way to cover repair costs, the reality is that these companies will rarely pay for your repairs and just cost you a lot of money for nothing.
How These Home Warranties Work:
With temperatures over 100 degrees in early May and July temperatures that top 110, an air conditioner is a necessity in Phoenix. When you prepare your unit for a tenant, you must have a working air conditioner. Your unit would never find a renter without an air conditioner for the next five-month heat wave.
The only problem is that air conditioners are quite costly to repair and replace. Your typical air conditioner will automatically have a 5-year or 10-year warranty from the manufacturer. Once you go beyond this time period, you have to do the repairs yourself. While repairs may only cost a few hundred dollars, a full replacement can easily set you back by $5,000 to $7,000.
Because of these costs, many property owners invest in home warranties. According to the warranty companies, this warranty is supposed to cover things like repairs and replacements. At least, this is how they are supposed to work. The reality is quite different.
Some home warranties will cover select repairs in limited situations. In recent years, this has become less common. More and more frequently, we have noticed that home warranties refuse to cover even the simplest of repairs. As your Phoenix property manager, we want to share two true experiences from just this summer.
One Landlord Loses $2,000 Because of Home Warranties:
The first story occurred with a tenant we will call Sabrina. In late May, she gave us a call to let us know that her air conditioner was not working. Sabrina has always been a good tenant, and she has some health problems. In the last two years, she has had four strokes and is currently dealing with a cancer scare.
As you can imagine, having air conditioning is extremely important for Sabrina. We immediately dispatched her call to the home warranty company as soon as we got it. Then, the warranty company responded to us within two days. It seemed like everything was going fine.
Three weeks passed by before we got another call from Sabrina. Now, she was worried because her air conditioner was acting strangely. It still ran, but it only cooled her rooms to 85 degrees. The property manager who got her call immediately dispatched it to the home warranty company as a recall. Then, the home warranty company dispatched the call to the previous vendor. Sabrina suffered without any air conditioning for another two days.
Finally, the vendor showed up to check out the unit. He told Sabrina that he would order the part, and it would arrive in another three days or so. Four days later, Sabrina reached out to her Phoenix property manager because the vendor never showed up.
According to the vendor, he could not replace the unit because the home warranty company denied his request. He needed an indoor coil to fix the air conditioner. The home warranty company wanted to spend less and repair the air handler instead. The vendor refused to repair the air handler because he thought it was unethical to do the cheaper, alternative option instead of the correct repair.
While all of this was going on, Sabrina was still sitting without any air conditioning. A second vendor was dispatched to the home. He set up an appointment for seeing her three days later, but he never showed up. Now, Sabrina had lived without proper cooling for nine days. Sabrina told her property manager, and the manager reached out to the vendor. It turned out that the vendor does not service that area and never bothered to tell anyone that fact.
By this point, the manager was furious. She called the warranty company because her sick tenant had been living without air conditioning for 10 days. In response, the warranty company sent out the only other vendor who services the area. The company said that the vendor will reply within the day. When nothing happened, the manager called the vendor to find out that they cannot service the home for two full weeks.
Again, the property manager called the home warranty company and demanded the “cash out” feature. This option is for when the home warranty covers the cost of replacing the item when it does not work, which means the homeowner can theoretically use their own vendor. The home warranty company responded by saying that they will call back with the price they will cover.
Another two days go by before the warranty company responded. While the manager waited, she got three quotes for the work that ranged between $2,500 and $2,800. To her total shock, the home warranty company finally called back and said they would only cover $697.
The tenant has already gone more than two weeks without air conditioning, so the property management company and the property owner have to get the work done by a vendor. They take a loss of $2,000 because they have to deal with this health and safety issue right away. In Arizona, a tenant cannot be without air conditioning for more than two weeks. If tenants are without air conditioning for too long, then the landlord has to pay 125 percent of their daily rent to cover the cost of a hotel room. For a $1,000 home, this means that the landlord would pay $42 for each day the tenant is without air conditioning.
Another Warranty Company Decides a Sudden Issue Is Pre-Existing:
In another case, the home warranty company refused to cover any of the work because they believed it was a pre-existing problem. Since the manager had previously worked with the vendor in the past, she called up the vendor to ask what his report actually stated. As a precaution, she decided to record the conversation.
In the conversation, the vendor stated that the problem was not pre-existing. He never even told the home warranty company that the problem was pre-existing, and the unit was only seven years old. According to the vendor, the home warranty company was causing problems because the policy was only four months old. They just did not want to cover the repair costs with such a new policy.
The Phoenix property management team immediately called the home warranty company and insisted that the company send them the vendor's report. The service manager at the warranty company said that it is impossible to send the vendor's report because they do not have a way to email or fax the report.
This was ludicrous for anyone to say in 2019. Thankfully, the manager recorded the call with the warranty company as well. Both of the recordings were sent to the homeowner.
The homeowner happened to be an avid investor in Arizona. With a lot of time and effort, he was able to talk to the president of the company. It took a lot of work, but they finally got a measly $1,000 from the company toward the cost of a new air conditioning unit.
Both stories are examples of the home warranty issues we see every single year. Property owners spend a significant amount of money on these policies, but the home warranty companies never actually pay out for repair costs. When they pay anything, it is just a fraction of the true cost. As a result of these experiences, we highly recommend that our property owners heavily weigh these frequent experiences when looking at the Pros and Cons of home warranties. Will the company you chose be an ally or hindrance?
We love discussing this with our current and potential owners and investors. If you have any questions about our experiences with your home warranty company or property management in Phoenix, please feel free to contact us at Service Star Realty.