Why We Don’t Buy Home Warranty

When Mr. FAF and I bought our first home, it came with a $459 home warranty plan purchased by the seller. By then we had never heard of or understood what it was.

“How is it different from home insurance?” We asked ourselves and our realtor, who explained that it was mainly for home appliances, including the HVAC (heater/AC). Whenever we have need a repair, we can call the home warranty company who will then contact one of their contractors.

When the contractor comes, we pay them a deductible of $100. Any other fee that goes beyond $100 will be paid for by the home warranty company. We thought it sounded like a good deal. Even if it didn’t, we didn’t have to pay for it, so we didn’t really give it much thought.

Our realtor highly recommended we renew the plan when the current one expired after a year. We nodded our heads and moved on with our lives until one day.

First incident

An outlet in the kitchen got burned, emitting black smoke around it. We freaked out and frantically contacted our realtor to ask about the home warranty plan and how to use it. She sent us a copy of the home warranty and provided a number for us to call.

The electrician came to fix the problem, and we paid him $100. It was the first time ever we had had to pay for home maintenance. I felt like I died a little bit inside. It was almost half a month’s worth of my groceries at the time. But we had no choice.

We all want a home free of problems. 

It was all fine until the 2nd incident which made me doubt the value of the home warranty plan.

Second incident

One day I came home to a kitchen floor soaking in water. Mr. FAF didn’t know how to fix it, and he was in another city.

Not wanting to spend $100 on a plumber, I turned to Youtube but couldn’t find out what the problem was. One video said the pipe was leaking. But it seemed so complicated, I decided to call the home warranty company.

Alas, a plumber came at 5:30 PM. He looked at the sink and said the faucet was broken and needed to be replaced. But it was already late, so he would need to come back the next day.

He said we needed to pay him $100 at the time and another $100 the next day to replace the broken faucet. We asked if the company covered a new faucet. He said no and suggested we buy a new faucet ourselves since it’d cost more if he had to buy it.

Distressed about paying for the plumber’s two separate visits to fix one problem, we went to Home Depot and decided to buy a good kitchen faucet for $235 which came with a 5-year warranty.

In total, it cost us $435 to have the faucet replaced. The home warranty didn’t help at all. The plumber and the electrician in incident #1 said if we called them directly, we’d need to pay $100, the same amount we paid with the warranty.

The research 

After some similar incidents when the company barely paid anything extra to cover the cost beyond the $100 that we paid, I decided to do some research online to see what other people say.

The results are mixed. Home warranty companies for sure say their plans can help save money. However, many articles advise people to think carefully about the age of their home, whether it has a lot of existing problems, and beware the policies that refuse to cover certain claims.

Many articles advise homeowners to save the money they’d spend on home warranty (~$500/year) and put it in a maintenance fund to cover unexpected repairs.

Conclusion

Mr. FAF and I visited this issue many times. What made us eventually decide not to renew the home warranty plan was a more than $100 increase in price from $459 to $575 for renewal.

After all, we’d still have to pay $100 for someone to come fix the problem on top of the $575/year. It’s just not worth it, especially considering our HVAC is only 9 years old and have hopefully almost 10 more years to go.

Over those 10 years, instead of paying the home warranty company, I can put $575-$700 (with annual increases) in the maintenance fund and have $$5,750-$7,000 to pay for a new HVAC.

We’re only 3 months into the second year without home warranty. We haven’t had any issues yet. I will keep tabs on all the maintenance expenses to see how we’re doing without a home warranty plan. So far, we’re happy with our decision to not renew the plan.

 



14 thoughts on “Why We Don’t Buy Home Warranty”

  • I am sorry to hear that you had a bad experience with the home warranty policy! Years ago, when Mr. Money Tree and I bought our first house, it came with a seller provided warranty. Shortly after we moved in, our water heater died. Thankfully, the warranty took care of the removal and replacement. Like you, we didn’t renew the policy when it expired, but for the initial problem, it did work out in our favor.

    • Hi Anne, I’m glad the home warranty took care of the water heater for you. I did give the HVAC a lot of thought before I decided not to renew the home warranty. The inspector said our HVAC was in good condition (knocking on wood). We also had the power company come check it for free, and they said it was fine. If the HVAC were 20 years old, I’d definitely consider renewing the home warranty. Home warranty gets very mixed reviews online, so I think it really depends on the condition of the home and the appliances.

  • I’ve always wondered about the benefits of getting a home warranty. Thanks for detailing out your experience. I do have warranties on my newish appliances. The way things are made these days, that seems to be a good investment.

    • Hi Janet, I’m glad you find the article informative. It’s always good to have a piece of mind with insurance. Mr. FAF and I are taking our chances this year to see how things go without the warranty. We might change our minds in the future depending on how much we have to pay this year. It’s great the home warranty works out for you. 🙂

  • Our home warranty was worth it in the first year of owning our rental but I think that I’ll only have it for another year or two after this. Once I have enough cash reserves to cover the repair visit myself, it’s just easier to go through the repair person directly.

    • Hi Revanche, I also found the home warranty helpful in connecting us with the contractors in the area when we were completely disoriented in our first year of home ownership. I keep most of their contacts just in case. From now on, I think I’ll also try to save up the cash for big repairs instead of giving the cash to the home warranty company. We’ll see how it goes this year.

  • MS. FAF, I’ve had both good and poor home warranty experiences. It was great when the AC went out in one of our rentals a few months after the close of escrow. But, for our main home, it didn’t come in much use and we let it lapse after encountering a couple situations similar to yours where an issue wasn’t covered or make sense given the high deductible. My current feeling is to have it in place for a new transaction, but not to keep it beyond a year after that.

    • Hi Michael, I’m glad the home warranty covered the AC in your rental. The HVAC is a big ticket item, and it’s always great to have a new one paid for. Our HVAC is only 9 years old. The realtor told us that the home warranty would just try to fix it as much as they can before eventually buying us a new HVAC should the current one run out. I did the math and decided to take my chances this time.

      I totally agree with you. If we buy a new house as a rental or a primary residence, I’d love to have the seller pay for the home warranty for the first year. After that I’ll need to review whether we’ve been spending a lot on appliance repairs/replacement in that particular unit to decide on renewal.

  • When we put our first house on the market, the realtor actually paid for a warranty for it (housing market was in a downturn at the time so was a perk for buyer – esp. since house built in 1920s). Before an offer was made, we ended up needing to replace the water heater due to a gas leak that couldn’t be fixed otherwise. So, we paid the fee and got a “free” new water heater (another selling point). The house we bought afterwards also came with 1 yr warranty coverage. But we haven’t seen a benefit, otherwise, or paid into a plan ourselves.

    • It’s great the plan worked out for you 🙂 I think it’s really a hit or miss depending on the age of the house and the appliances in it.

  • I have a feeling that if home warranties were so good for consumers that these warranty companies wouldn’t stay in business. For the most part I do all the repairs in my house and Youtube at this point is my best friend 🙂 If I can’t, I have an ace in the hole as my Dad is super handy. So between the two of us we can normally figure things out.

    • OMG I have the same thoughts! I mean it’s great they’re in business and employ people and all. But they have to make enough profit somehow to stay in business.

      I also look up Youtube videos to fix things my our house and even wrote a post about how amazing Youtube is. I’m addicted to Youtube on so many levels.

      Mr. FAF is not a handyman and is not so interested in learning how to repair things himself. Being the more frugal one, I feel the urge to figure things out before dropping $100 on repairman. It’s great you have your Dad help out. 🙂

  • The home warranty we got with our home purchase was a joke. We tried to use it on our 5 year old dishwasher. We were told the repair would be more than it was worth. So $100 deductible to get a check for $157.

    • Oh no that doesn’t sound like a good experience with the home warranty! Actually, sometimes I do think about what if our $200 fridge in the basement broke if we still had the warranty plan. We would pay $100 for someone to come fix it. But if they came twice, we’d be able to get a brand-new fridge @_@ Anyway, I guess the home warranty would be the most valuable for big ticket items such as an HVAC. =)

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