I don’t know whether to call it a trend or a theme, but this week my real estate business has had one.
First, the pilot light on the furnace in a buyer’s new property went out the day before closing. Next, the forced air furnace in one side of a duplex a buyer is considering came back with a yellow flame; which may or may not be the sign of a cracked heat exchanger (which can result in the unit producing unsafe levels of carbon monoxide).
Then I got a call from a rural tenant stating they had no water in the house or any of the outbuildings on the property.
The theme for the week could be “things break”. However, there’s another one here; whenever possible, get a home warranty.
It seems like everyone from Best Buy to car dealers offer an extended warranty these days. And we’ve all had experiences where the coverage they provided were not worth the additional cost.
I haven’t found this to be the case with most home warranties, however; especially when a client is purchasing a foreclosed property.
Many foreclosures not only have deferred cosmetic maintenance, but the mechanicals like the furnace or boiler and water heater have been ignored as well. Most banks aren’t in the business or maintenance or repair, so whatever’s wrong with the property will most likely be the buyer’s responsibility.
When the foreclosure wave first started, many of the home warranty companies affiliated with major real estate brokerages didn’t cover pre-existing conditions.
Since then, however, some, like American Home Shield, have started offering additional coverage for “previously unknown” conditions. Of course, there is a slightly higher premium for this coverage, but it’s well worth it.
Home warranties tend to run anywhere from $400 to $600/year. Duplexes, triplexes and fourplexes can be warrantied as well, at higher premiums, of course.
Duplex sellers can also get coverage prior to putting their property on the market. In the last year, I had one seller decline to do so, only to have to put thousands of dollars into repairing the property’s boiler while it was on the market.
For the buyers of the two properties with furnace issues this week, either purchasing a warranty at closing or having the seller buy one for them will cover much of the cost of not only get the furnaces repaired, but replaced if necessary.
In my case, the bank that has my loan offered the opportunity to purchase a warranty, with the premium folded in to my monthly mortgage payment. Knowing there was a well on the property, I purchased additional coverage for the well pump. I will be responsible only for covering the cost of the service call ($60); on a repair that may well cost thousands.