In the last year, many of my clients have reported problems with their home warranty plan. Most of the complaints dealt with legitimate/valid claims that were denied by the warranty company.

A home warranty is a insurance policy (but not regulated by the State of Ohio Department of Insurance) that covers most major mechanical components (heating, cooling, plumbing, electrical, air conditioning, etc.) of a home or condo for one year after closing. A home warranty typically cost $375 – $400. Homeowners pay a service fee (deductible) the first time a service provider is dispatched by the warranty company to make a repair. The service fee is typically $50-$100 and is applied for each new repair claim.

Home warranties have become a fairly standard item in real estate transactions in the central Ohio area. As an advocate of the home buyer, I’ve always tried to have a Seller pay for a one year home warranty plan for the Buyer. A home warranty is usually a good value and nice “piece of mind” for the new homeowner. The problems have been so bad with a few of my clients that I am seriously re-thinking the value of a home warranty.

Below is some good information about home warranties that the average consumer might not be aware of. I’ve also provided some tips on dealing with home warranty companies and how to process a successful repair claim.

  • You will probably have to pay MORE than just your deductible. Make sure you read the fine print of your home warranty contract. Most homebuyers don’t realize that they will have to pay for some misc. parts and labor that might not be included in a warranty claim. The good news is that even on a major repair claim the total cost is typically no more than $100 – $200.
  • Be prepared to be an “SOB”. Many homebuyers have to call in the same repair claim multiple times. This is typical with most home warranty companies. Remember, the home warranty company is a profit company that will try and do the “least expensive” repair. For example, your 20 year old A/C unit stops working. The warranty company repairs your A/C unit and everything seems to be working fine. Even though the unit probably just needs to be replaced with a new unit. Your A/C unit stops working again a week later. The warranty company authorizes another repair. A/C unit is working fine but then again a week later the unit fails.
  • What is the renewal rate on home warranties? Homebuyers are allowed to renew their policies every year. Some home warranty companies claim a renewal rate of 50% – 75%.  I think this number is BOGUS. In my experience since 1996, my clients have only renewed LESS than 25% of their home warranties.
  • Ask your agent about any bonuses. Most home buyers are not aware that most real estate brokers receive a small bonus for every sold home warranty policy. This bonus is typically $50 – $75. You want to check with your real estate agent (buyer agent) and see how their office deals with this bonus. In my opinion, the bonus should be passed through to the home buyer or provided to a non-profit charity.
  • Pre-existing conditions & Inspections. You need to make sure all of your mechanicals (furnace, A/C, electrical, etc) and appliances have been inspected. If home inspector finds even a minor problem it should be addressed in a repair request to the Seller. If an item is not working satisfactorily prior to closing then it will not be covered under most home warranty plans. Also, ignorance might void a possible warranty claim. If you just assume everything is working fine in your new home and you don’t check/inspect every item than any possible warranty claim could be denied. This seems like common sense. But, this has been a major misunderstanding for a lot of homeowners. For example; a Buyer does NOT inspect a home. A month after moving in the Buyer turns on the furnace or an appliance for the FIRST time. Homeowner discovers the item is not working. Home owner calls in a warranty claim. Home warranty representative ask home owner, “When did the item last work?” Homeowner answers, “I don’t know. My home is only a few years old and I didn’t inspect”. There is good chance that the item will not be covered under your warranty policy. You need to inspect everything and have documentation that all items are working satisfactorily prior to closing.
  • Home warranty companies are out to make a PROFIT. You can’t forget this important point. Home warranty companies will always favor repair or multiple repairs over new replacements. I’ve had many complaints from my clients of having to deal with unprofessional and non-responsive customer service reps. Customer service reps actually hang up on homebuyers and also routinely kept home buyers on hold for 30 – 45 minutes. So, just be prepared to deal with the worst possible situation.
  • Who is really the main customer for the home warranty companies?  Let’s review everything so far. Home warranty companies pay bonuses to real estate brokers.  My experience has been low renewal rates on     existing policy.  Home warranty district/area manager salaries are paid mainly to “drum up” business via soliciting real estate professionals.  In my opinion, the business model of home warranty companies is mainly geared toward real estate brokers and NOT the home owner or policy owner. I think this is the main reason for the increased complaints from my clients in the last year.


  1. Don’t call at peak times. Mornings, lunchtime and late afternoons are peak times. Call at a non-peak times and plan on having 20 – 30 minutes of time to file your claim.
  2. Document everything. You need to obtain the name and phone extension of every customer service rep (CSR) that you talk to. You also want to take notes of the conversation, date and time of all calls.
  3. Ask to speak to a manager or supervisor if you feel you are not receiving adequate customer service.
  4. Submit your claim via the phone. Repair claims submitted via an email form (if applicable) appear to have a slower response time
  5. Most home warranty companies have district mangers that deal directly with real estate brokers. If you are having difficulty getting a satisfactory claim result, then the district managers can be very helpful in negotiating a satisfactory solution. Contact your real estate agent (buyer agent) to help you resolve your claim and to contact the district manager.
  6. Don’t be abusive or rude even if you are dealing with un-cooperative CSR. Always try to be calm and persistent. Never take no for an answer. But, you might eventually have to act like an “SOB” to get satisfaction.
  7. Check into other pro-consumer organizations that might be able help you resolve your home warranty claim issue.

            State of Ohio Attorney General
            Better Business Bureau
            State of Ohio Department of Insurance*
            Small claims court (Franklin County)

*House bill 243 – April 2004, Ohio Department of Insurance is now not responsible for regulating home warranty companies and policies.

HomeBuyer Advocate Mike

Representing People, NOT Property!

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