Erica Sagon
The Arizona Republic
More pre-owned houses are coming with home warranties these days. But when it comes to renewing the warranty – the service contract that shields homeowners from unforeseen repair costs – consumers are asking: is it really worth the cost?
A standard warranty runs $300 to $500 for a year of protection, which covers the cost of repairing or replacing a home’s major systems and appliances. Home sellers typically pick up the tab for the first year of coverage. Extended coverage plans for pools, spas and washers and dryers can be purchased at an extra cost.
Advocates say contracts provide peace of mind and budget protection for consumers, especially first-time buyers. Homeowners pay $30 to $100 for each service call, which is a fraction of the market rate for service and parts.
But some consumers have long criticized warranties as false protectors.
The contracts have quirky policy loopholes and are hard to understand on the first read. Homeowners also complain about lousy service from contractors and that warranties are simply a bandage for bigger problems.
Phoenix resident Monique Ashton recently filed a claim for a leaky bathtub faucet. She paid a $40 service fee, but the leak returned.
When she called more than a month later to report the problem, it was considered a new claim and took another $40 to fix.
Apparently, the warranty company allowed a 30-day window to follow up with complaints. The stipulation was probably in the fine print of her contract from the vendor.
“I was really irritated with them,” Ashton said.
It is common for consumers to misunderstand the warranty’s terms, said Pattie Hackmann, vice president of sales for Fidelity National Home Warranty.
The Better Business Bureau advises consumers to read the contract thoroughly and ask plenty of questions about what is and is not covered.
There are plenty of limitations and exclusions. For one, warranties don’t cover secondary damage. So, if your toilet malfunctions and leaks all over the floor, the warranty covers the broken toilet but not the damaged floor.
Secondly, warranties don’t cover pre-existing problems.
The Arizona Department of Insurance, which licenses vendors and takes complaints from consumers, advises people to read their contracts thoroughly before signing.
Denial of a claim is consumers’ top complaint, followed by delays and unsatisfactory results, said Erin Klug, spokeswoman for the department.
“We definitely will try to advocate on people’s behalf,” Klug said. “We’re not always successful. It’s very dependent on the contract language.”
It’s hard to say how widespread the problems are because the state isn’t sure how many policyholders are out there. Unlike California and some other states, Arizona does not require companies to report the number of warranties sold.
Consumer complaints of home warranties haven’t translated to slower sales, though. Anecdotal evidence and company records indicate that warranty sales are at their highest.
Fidelity National Home Warranty estimated a “phenomenal” 36 percent increase in sales in Arizona from 2003 to 2004, Hackmann said.
Consumers are vastly more aware of home warranties today than they were a decade ago, Hackmann said.
Part of this can be attributed to real estate agents, who are the key marketers for home warranties. Some agents even get a kickback from the vendors.
Realtor Darrell Blomberg carries brochures for five or six warranties when meeting with his clients.
Some industry experts claim that homes with a warranty sell faster than unwarranted homes, but Blomberg said that’s not the case in metropolitan Phoenix.
Given the tight inventory of homes on the market, sellers don’t have to offer extras to snag buyers, Blomberg said.
