One of the greatest benefits of having insurance is peace of mind. It takes the worry out of an unexpected repair and reduces the financial worry of maintenance. However, not everyone believes in insurance or home warranties.
What Kind of Vendors are Home Warranties Using?
One consideration to keep in mind is that insurance is a multi-billion dollar business. Insurance companies and home warranty companies will come out ahead in the long run because in order for them to stay in business, they need to turn a profit. They price their policies accordingly.
Home warranty companies have contracts with companies that are willing to work for them for less. These vendors agree to work for less either because they do not have much business, their marketing isn’t in place, or they are simply unsuccessful and need to find any kind of work wherever it shows up. In some cases, that will be through a home warranty company.
Our take is that the investor is getting a less than perfect service by working with a home warranty company, and will have to deal with work that isn’t the highest quality.
Home Warranties Are Not Perfect
Home warranties do not fix everything. For example, air conditioning repairs are often denied for dirty coils. Appliances are rarely replaced, and instead warranty companies will patch them up. This means they can charge for additional service calls to the property. Tenants often get frustrated with this process. Often, a refurbished appliance could have been replaced at a similar cost as the deductible, and it would have made the tenant much happier and more comfortable.
The biggest issue is the vendors that take the service calls. While they get paid less for the call according to their home warranty contract, they can still charge extra for the parts that are not included in the home warranty. They can make money by charging more for those parts. The same thing may happen with appliance removals. This is often not part of a home warranty contract, and the vendor will charge extra there as well.
Finding True Peace of Mind
It can be reassuring to know that if the air conditioning goes out, it will be replaced because of the home warranty. But, is it going to be replaced right away? We know that 20 percent of tenants move out of a rental because of maintenance not being performed to their liking. The unknown is whether or not the tenant will move because of poor service through a home warranty.
Do the Math Before you Buy
It’s always good to compare the savings versus the cost of a home warranty. Add up the cost of the warranty and compare it to what you’d pay without the warranty. Be sure to include the deductible and service call fees, and see if the cost of a warranty is higher than your savings.