How home warranties can help sell a home

• Some suggest that one way to distance your for-sale home from others on the market%2C or to better hedge your new investment%2C is to acquire a home warranty.
• Available from a variety of companies%2C these home protection plans cover the costs of repair or replacement for many components and appliances such as refrigerators%2C washers%2C dryers%2C dish washers%2C heating%2C air conditioning and plumbing%2C electrical%2C water heaters%2C garage door openers%2C pool motors and other items.
• The company says homes with warranties have an average of 11 fewer days on the market and sell for %242%2C300 more than those without.

Sure, the West Valley is building new homes, existing-home values are rising and credit is easing even with stricter federal lending guidelines.The standard mortgage rate is still historically low.

But properties are still not selling as briskly as many had hoped, the market has flattened, and sellers and buyers of West Valley real estate are searching to make a deal at their best advantage.

Some suggest that one way to distance your for-sale home from others on the market, or to better hedge your new investment, is to acquire a home warranty.

Available from a variety of companies, these home protection plans cover the costs of repair or replacement for many components and appliances such as refrigerators, washers, dryers, dish washers, heating, air conditioning and plumbing, electrical, water heaters, garage door openers, pool motors and other items.

"Our research already shows that homes with an American Home Shield home warranty sell faster and at a higher price point than those without a home warranty," said Nicole Ritchie, senior director of communications, for American Home Shield, a Memphis, Tenn.-based company founded in 1971 which offers these home-protection plans.

The company says homes with warranties have an average of 11 fewer days on the market and sell for $2,300 more than those without.

A business unit of ServiceMaster GlobalHoldings, Inc. (NYSE: SERV), American Home Shield serves 1.5 million-plus customers in 50 states.

Sellers and buyers both can benefit from the "peace of mind" of a home warranty at a high-stress time when little items can become big concerns. Calling a reputable warranty company, after all, can be easier than finding tradespeople yourself.

For sellers, a home warranty protects their budgets during the listing period, as they know they won't be out of pocket for the repair of a major appliance, for example, and it distinguishes a property from others and reduces any pre-close issues related to the home inspection, Ritchie said.

In addition, home sellers often purchase a warranty as a gift for buyers because they know it can give new homeowners more confidence in their buying decision, she said.

For buyers, they can receive, in addition to basic appliance protection, repairs and replacements for mismatched systems, coverage for undetectable pre-existing conditions, improper installations, lack of maintenance, rust and corrosion. On average, homeowners spend 1−4 percent of their home value on maintenance and repairs, according to American Home Shield. A home warranty offers affordable budget protection against the breakdown and replacement of these home appliances and system components.

Realtor Bruno Arapovic recently discovered, during a home inspection, that a water heater was starting to leak. "Because the seller had the home warranty, the water heater was replaced, and the buyers were extremely happy that they purchased a home and received a gift of a brand new water heater. The seller only had to pay a small service fee," Arapovic said. The Arapovic Group with HomeSmart sells homes in the West Valley and other metro Phoenix areas.

But there can be home warranty downsides, said Jan Stevens, an agent, staging professional and active adult community specialist with the West Valley office of Russ Lyon Sotheby's International Realty.

For one, the cost can range from $385−700 or more depending on inclusions, typically paid by the seller as part of the contract negotiations. "If the seller won't pay, we usually recommend the buyer get one anyway, even at his/her own expense," she said.

In addition, there is a service fee of up to $100 depending on the warranty chosen. And, if the buyer wants to renew the warranty after one year, it may cost more than it did originally.

"Many warranties do not cover pre-existing conditions, as determined by the tradesperson that handles the service call; they have a lot of leeway when making that call," she said. In this spirit, too, the warranty company contracts with their tradespeople, so homeowners cannot select on their own, and replacement parts/materials will be the company's choice.

Finally, additional fees can be charged for removing old units, collateral damage that is incurred, such as fixing a leak behind walls, or code upgrades, Stevens said.

Ritchie suggested to have a backup plan for emergency situations: For example, how will you keep medication at the proper temperature if your refrigerator breaks down?

And, she said, "Do your homework. Look for a provider that has a proven track record, is financially sound, has associates available 24/7 and has large network of reputable contractors in your area."

Arapovic said, "Although home warranties can protect you from unexpected and costly repairs, it can also give you a false sense of security. So, read the 'small print.' For example, if the seller's air conditioning breaks down, and it is determined that it was not properly maintained, the home warranty you thought was such a value-add might not replace it."

Brown is a Valley-based freelancer (azwriter.com).