Home owners warranty - worth it in unique situation?

[Aardvark]

In general Home Warranties seem like a scam to me, but I think we might be in a unique situation.

We are closing on a house on Wednesday, and we know the following:
The furnace, AC, and hot water system is probably on it's last legs. Many of the neighbors in this development have already replaced one of - if not all of - these assests. They are all about 16 years old - they all came with the house as part of the original development.
The furnace recently had some issues. The previous owner said that it was the blower fan that was having issues and that all is well now that he has replaced the blower fan motor... But we don't exactly trust this.
There is also a water softener that was leaking (but isn't anymore)... I don't know anything about water softeners, but I assume they are not supposed to leak - the water softener is probably also 16 years old.

Our realtor has recommended a home warranty through a local company that he says is well known for actually paying out (we have reason to trust our realtor in general, but I think he might just be wrong about this). We connected with the company and they claim that they would pay out for the furnace and AC even if it does not have a service record, which is something we were worried about. I am worried that there will be some scaminess if the time for payment comes. Maybe they only pay out the book value of the furnace or something like that. Or maybe they have some other BS reason for why this particualr furnace doesn't qualify.

Anyway - bottom line is that I wam wondering whether it's worth hedging the risk of all of these appliances dieing out in a short period of time by purchaing a home warranty for about $600.

Thanks in advance! :)

[reeshau]

If you know you will utilize it, then yes it can save you money on repairs.  Our house purchase negotiations came down to a busted water heater, and thankfully the homeowner had purchased a home warranty, so we could get that covered.

But, understand that warranty repairs will use equipment that is specified by the warranty company, not what you would buy.  So, you will get an 80% efficient furnace (if your state allows them) instead of a 96% efficient one.  Likewise, other appliances will be on the lower end of capability / quality, so if that would bug you, it might be worth it to bite the bullet.  If money is tight, it can get you by, put start saving up for the replacements.

The water heater, for example, is a Rheem, which is notorious for having the heating elements fail.  Having had this happen twice in three years, our plumbers finally talked the Rheem warranty department to use a different model's more-reliable heating element in ours.  So far, so good.

[RWD]

The seller for our house covered the cost of a home warranty for us. As luck would have it the microwave died shortly after we moved in. It took 2 months for the home warranty to fix it (they dragged their feet at every step)...

[cowman]

read the terms,conditions and fine print very,very carefully.

These guys are in business to make money.How are they going to make money fixing things at or beyond their expected life?

I am not sure,but they do.

YMMV

[Omy]

Read the fine print, look at reviews for the warranty company, check it's BBB rating. I've used warranty companies and gotten my money's worth in the past. Over time they don't make sense, but if you don't have the money to handle multiple big repairs in a row, it might make sense for the first year. What is the name of the warranty company that us being recommended?

[reeshau]

Now that it's come up, it is important that the seller buy the warranty, not you.  If you buy it, there is usually a 6 month waiting period for coverage.  If the seller buys it, the waiting period may start before the day of sale, or be waived.  (Read the fine print)

[GilesMM]

Your situation is not unique - nearly every used home sale will include equipment which could be nearing a repair need.  Real estate agents love warranties as a way of keeping buyers from complaining later about repairs, especially first time buyers or those who may not have cash for repairs.  Warranty companies will make it very difficult to get a claim paid.  First, they will drag their feet on sending a service tech and keep you waiting 1-2 weeks for a visit.  Next, they will only replace the parts which mechanically failed, not the whole unit, despite terrible condition of a clapped-out old machine. They will say parts are back-ordered and try to wait you out.  You may eventually get them to pay up on the parts, but then you can't find the parts either.  In the meantime, you have had no HVAC or hot water for weeks or months.


Better to grind the seller down on the price based on the inspection results which shows aging mechanicals or get them to fund the warranty as cash back to you at closing.  Keep the cash and use it for repairs.  Of course, all this is best done right after the inspection.

[Omy]

This has not been my experience with warranties. Somebody usually comes out within a day or two. They will definitely try to repair before replacing an appliance, but I'm generally OK with that.

A warranty company replaced the HVAC system at one of my rentals because it could no longer be repaired. I've had multiple appliances replaced when they couldn't be repaired - with comparable equipment. If you don't want the appliance they are offering, you may be able to get them to give you cash to use toward the purchase of whatever you want.

There's a lot that isn't covered, so it's important to really understand the fine print. Also, purchase a warranty from a company that has a good reputation of following up on claims.
A good, experienced realtor would be insane to recommend a warranty company that was going to screw their clients over.

I would definitely ask the seller to purchase the warranty.  That being said, if you have a good emergency fund it will likely be fine to pay for things as they break down and not have a warranty in place. I'm sure we would have come out ahead over the years without one, but it was nice peace of mind for the years when everything seemed to break down at the same time.

We no longer have a warranty in place because we're able to handle multiple breakdowns at the same time and are able to fix a lot of things on our own.

[reeshau]

I will also say that we did not have any problems with claims response on home warranties we've had in the past.  In our early years as a couple, we considered a home warranty as a matter of course for the first year when buying a house, because we didn't know the history of it.  (despite disclosures and inspections)  Our recent experience was some forethought on the seller's part, as they had already moved out some time before.