Denver Divorce and Real Estate Lawyer Blog. (Vol 1.46) November 2, 2014
By Craig Franklin Chambers Esq. 7851 S. Elati Street #204, Littleton, CO 80120
The Littleton Lawyer.
As a Metro Denver attorney practicing family law, custody, divorce and real estate law in the Denver area, including Highlands Ranch, Littleton (including Ken Caryl, The Valley and the North Ranch), and Arapahoe, Douglas, and Jefferson County, I am often asked the question: Should I buy a home warranty with the purchase of my home?
When you purchase a home, some real estate brokers advise --- and some sellers offer --- a home warranty. The warranty can be paid for by either the buyer or the seller, and some brokers offer the warranty as a marketing tool.
The home warranty is sold by a private insurance company at a cost of several hundred dollars. Various warranty plans cover different components of the home, for example the appliances, plumbing system, hot water hear and the furnace. The warranty plan is sometime upgradeable and renewable annually after closing.
There is nothing inherently wrong with these warranty products. They add peace of mind to the home purchase. But there are two things to remember in deciding whether or not to purchase a home warranty
First, a home warranty is not a replacement for a home inspection. Before you decide whether to purchase a home warranty, you should have a thorough home inspection by a professional home inspector or an engineer. Under the terms of the standard CREC real estate contract, you are entitled to as many inspections as you want providing the inspections are completed within the time periods in the contract.
Aside from a standard home inspection, many people test for mold or radon, and, with an older home, most inspectors recommend a sewer scope to inspect the sewer line. Also, don't rely on a home inspector for specialized items. If the furnace or roof are old, have an inspection from a professional HVAC contractor or a roofer.
Secondly, home warranty companies do not cover pre-existing conditions. Therefore, if your purpose in purchasing the home warranty is to replace existing problems with the home, it is unlikely to work out. Rather, you should go after the Seller for these repairs during the inspection period, especially if the issues affect the health and safety of the home.
Most of the warranty companies do not actually inspect the homes prior to selling the warranty, and they may deny the claim arbitrarily just simply based on the age of the home. Warranty companies for new homes are especially notorious for refusing to pay warranty claims. With that in mind, I would definitely check the reputations of the warranty company you are considering.
A home warranty is not a replacement for a home inspection, and, because warranties are offered by an insurance company, do not be too disappointed if they refuse to honor their promise to replace systems that fail in the home.