Home Warranty: Are You Being Duped

In property management, one of the worst things a client can tell us is that they have a home warranty on their investment property. And as a homeowner and future investor, this is probably the one and only time I’ll write about home warranties, so I guess I better kill two birds with one stone. I’ll share my disappointing experience with American Home Shield so that you never have to deal with them, and then ask the larger question: are home warranties worth it?

What is A Home Warranty

A home warranty is what it sounds like. Anything that goes wrong with your home, that isn’t a home insurance issue is typically covered under a home warranty. There’s an annual premium (around $400-600) and typically a deductible or base service fee (around $35-75, depending on the extent of coverage you sign up for) you need to pay each time someone comes to your home. Things typically covered by home warranty: HVAC units, kitchen appliances, plumbing issues, etc. When there’s a problem, the warranty company sends one of their contractors out to fix the problem.

Firsthand Knowledge

My husband and I purchased a home 2.5 years ago. The home was just over twenty years old and the offer of a home warranty for free (paid for by our agents) was somewhat of a selling point. No worries, right? WRONG!

Everything was seemingly ok when we called them for our garbage disposal to be replaced and the occasional clogged toilet that required more attention than a plunger and some DRANO (old pipes will do this to you.)

Fast forward to June 2021. Upon returning home from work one evening, I noticed that there was a constant running water sound that did not sound like a toilet refilling, rather a toilet overflowing. But it wasn’t a toilet, it was our water heater leaking in our garage. INSTANT PANIC MODE!

So, we called American Home Shield and what proceeded was one of the worst services experienced I think I’ve ever had. I’ll spare you the details. Here are the highlights:

The contractor (Emergency Rooters) never called me to schedule an appointment. I had to call them repeatedly until someone showed up. Not to repair nor stop the leak, but to take pictures. WHAT?!

Ten voicemails were left to the plumber. 6 calls to American Home Shield, all of which carried 30–40-minute hold times.

After making a written complaint to the BBB (Better Business Bureau) I finally received a call back from the plumber, letting me know that they were awaiting approval from American Home Shield to replace the water heater. We are now five days in. Still no hot water.

Our water heater was still draining/leaking into our home causing extensive water damage to the interior of our garage and water heater stand. 

Tracked down the plumber and demanded the removal of the old water heater just to stop the leak from further damaging the house. (DAY 13)

The plumber shows up, removes the water heater, but does not indicate when the new one will be installed. (DAY 14)

After an extreme amount of frustration, cuss words, and commuting to my in-laws so we could bathe, I caved and paid $1500 out of pocket to have it replaced by an outside vendor.

After all of this, we called American Home Shield and their response was, we’ll reimburse you for the cost of the water heater that we would have paid the plumber; $750.25, but we cannot issue a warranty on this item because you did not use one of our vendors. WHAT?!  HOW?!

In the end, we went without hot water for 2 weeks. I am thankful that we have hot water, but we are still out of the $750 dollars (half of the $1500 I paid for a new water heater), my time of waiting on hold, commuting 45 minutes to my in-laws to bathe, not to mention the damage to my garage that still has to be fixed.

I am better off opening a Maintenance Checking Account and putting the monthly “home warranty fee” in that account and the taxes that I get back for owning a home.

Home Warranty for an Investment Property

Now imagine your resident (tenant) going through this experience. This would and could warrant a call to Fair Housing to complain, as this is a habitability issue that could draw a very expensive fine.  Not to mention residents move seven times faster if repairs are not done on time compared to raising the rent. Working in property management for the last five years, I have seen and heard the number of hours that our property inspectors spend on the phone with Home Warranty companies.

What do you think about home warranty companies? Odds are if you’ve used one before you’ve probably got a strong feeling about them. Home warranty companies have led the list of most complained about companies on Angi for several years now.

If you’ve never used a home warranty company before then you’ll probably get exposed to one the next time you buy or sell your house. Real estate agents encourage sellers to offer them to give the buyers a little more assurance. Agents likely receive a commission to push these on the sellers. Thus, unsuspecting new homeowners who aren’t going to look a gift horse in the mouth will gladly take them up on the offer.

Thus, the b.s. spiral keeps these poor-performing companies alive. If there’s a new homeowner there’s another taker for a “free” home warranty.

If you’ve found a home warranty company that you like doing business with, you should probably consider yourself lucky. Or you probably purchased your own and did your research about who was a good company. As with any marketplace, if people are free to make their own choices and they are spending their own money, a better product or service type is the result. I’d be willing to bet American Home Shield has about 95% of their policies purchased by sellers.

In conclusion, if you’re dead set on buying the home warranty, do your research, call and talk to at least 5 references and find a solid company. If you can be convinced otherwise, just start a savings account for home repairs and find a trusted local handyman to help you when things break. If you’re buying a new home soon or purchasing an investment property, don’t let the real estate agent give you some line about how they got that added in as a perk. It likely isn’t a good thing at all. In fact, you may just end up like me, out $750 and still in need of repairs.