Today, we're diving into home warranties. Have you ever bought an investment property and thought, "A home warranty sounds great!"

Perhaps your agent suggested buying a home warranty to take care of everything.

If this sounds familiar, you’ll definitely want to read on, as I break down some of the disadvantages of home warranties for your rental property.

What is a Home Warranty?

A home warranty is essentially a service contract that covers the repair or replacement of important home system components and appliances. These warranties typically cost between $500 and $1,000 per year. Coverage varies widely—some policies cover a lot, while others cover very little.

You often see home warranties in real estate transactions, where agents negotiate the seller paying for a home warranty to cover mechanicals and various repairs for a year. This means you pay a premium upfront, and the warranty company handles the repairs by sending their own contractors to fix any issues.

Why Do Home Warranties Suck?

Unfortunately, home warranties come with their fair share of pitfalls. Here are the top reasons why we at Emerson Property Management do not work with home warranty companies:

1. Meeting at the Property

   We had an owner insist on using their home warranty company. Despite our advice against it, we accommodated as long as they didn’t renew the policy. The first issue we encountered was that the home warranty company required someone to meet them at the property—a huge hassle if you’re out of state or if your property manager isn’t available. This also incurs additional costs for coordinating with their schedule or paying a vendor to meet them.

2. Vacant Properties

   Many home warranty vendors won’t enter vacant homes, which is a common scenario during property turnovers. Typically, most vendors use lockboxes and enter the property with a code. Home warranty companies may require the policyholder to be present, complicating things further, especially if you're not nearby.

3. Service Fees

   Home warranty companies often charge service fees that add up quickly. For example, one company we dealt with charged a $75 service fee right off the bat, plus another $50 to $100 if someone had to meet them at the property. This doesn't even cover the actual repair costs, leading to exorbitant expenses before diagnosing the issue.

4. Limited Coverage

   Coverage details can be tricky with home warranties. Some may only cover specific items or limited quantities of materials, like a pound of Freon or certain appliances. Moreover, they often charge more than independent contractors for additional required services. By the time you add up service fees and limited coverage, the savings are minimal.

5. Service Timelines

   Home warranty companies can be notoriously slow. We once put in a repair request on a Monday, and the earliest they scheduled was for Friday. Such delays are unacceptable, especially in extreme weather conditions like the Texas heat, where timely repairs are critical. For us at Emerson, the median speed of repair goal is four days, often quicker.

Consider These Points Before Buying a Home Warranty

Home warranties might seem like a quick fix advertised by sellers or agents, but they can become problematic, especially for out-of-state investors. Here’s what you should question:

• Will someone need to meet the technician at the property?

• Are they willing to enter vacant homes?

• What exactly will they cover?

• Will the service fees make financial sense in the long run?

• How quickly can they address urgent issues?

In contrast, a good property management company offers better, faster, and cheaper solutions through an extensive network of vetted vendors. We process thousands of work orders annually and maintain high resident satisfaction, thanks to our efficient processes.

Final Thoughts

Next time you're tempted by the idea of a home warranty, stop and think through these points. A home warranty might work for some, but for many, it just doesn't add up. Instead, focus on hiring a competent property management company that ensures quick, reliable, and cost-effective maintenance.

I hope this was helpful. If you’re considering a home warranty or already have one, weigh these disadvantages carefully. Thanks for tuning in, and I’ll catch y’all next week!