Westcoe Realtors, Riverside California…Today’s blog subject comes courtesy of one of our recent buyers, who encountered the above problem with a home she just purchased a few months ago. Fortunately, she called us instead of just “living with the problem”, and we were able to get a resolution for her. Perhaps by reading below, we can save you some money and headaches too.
First, we need a little understanding on exactly how Home warranty companies work.
At the close of escrow, if a home warranty policy is paid for (by either the buyer or seller…it doesn’t matter), in theory this home warranty policy is insurance for the buyer that if a covered appliance or system stops working in the first 12 months, the home warranty company will fix the problem, or replace the broken item if it cannot be repaired. There is a nominal fee the buyer pays to have the repair person do the work ($35-$50 in most cases), but that should be the only fee the buyer has to pay.
Next, understand that the way the system works is predicated on two very important items.
One…the repair person does not work for the Home warranty company, but is instead contracted out by the Home warranty company. They will have a contract with a local plumber, electrician, etc. to handle all their work, and in exchange for this contract, the local plumber will do the work at a greatly reduced fee to the Home warranty company. It is important to understand that the repair person is working for less money for the Home warranty company than if you called them out directly.
Secondly, all Home warranty companies have in their paperwork a clause stating that if the problem to be repaired is judged to be “pre-existing”, then it will not be covered. This make sense, in that if the dishwasher, for example, didn’t work when you bought the home, then they are not going to repair or replace it for you at the nominal cost. You should have done that when you bought the home.
So…what happens now?
Well, in most cases, all goes well. Something breaks, the home warranty company is called, they send out their contracted repair person, the buyer pays the nominal fee, and the problem is solved.
However, in some cases, the repair person shows up at the home, and tells the buyer that the problem was “pre-existing”, and therefore not covered…but for the normal, larger fee, the repair person can fix the problem. Maybe there really is a “pre-exsting” problem, or maybe the contractor wants to repair the problem at the higher rate than the lower rate. Who knows? In our case above, the buyer got angry and called the Home warranty company, but the home warranty company took the repair person’s word the problem was indeed “pre-existing” and said they would not pay. Again, maybe this was legit, or maybe the Home warranty company simply wanted to avoid paying for a new dishwasher. Fortunately, the buyer called us.
In some cases, either the contractor or the Home warranty company will use the “pre-existing” clause as a way of getting out of an expensive repair…and sometimes, like with any insurance company, you have to fight a bit to get what is right. In this case, the problem was a leaking diswasher, and due to the marks on the floor under the dishwasher, it appeared that there had been a small leak for some time…but this could only have been discovered by removing the dishwasher to see…which obviously was not done when the buyer bought the house.
We were able to convince the Home warranty company that it was unreasonable to foresee what could not be seen under the dishwasher, and we also had a home inspection report that showed the dishwasher was working with no visible leaks at the time of the purchase. In the end, the Home warranty company relented, and authorized the contractor to replace the dishwasher.
It should also be noted here that most Home warranty companies have sales representatives who call on all real estate offices. These sales reps do an honest job, and the last thing they want is to have their reputations “tarnished” in a real estate office if there is a repair that is being unjustly denied by the “home office”. Again, in our case above, we also got the sales rep involved, and she helped solve the problem as well.
In summary, please understand that in the majority of cases, the Home warrany companies operate just fine, and provide a valuable service…but sometimes, claims are denied for the wrong reasons…and if you find yourself in that spot, simply call your real estate agent. As you can see, they may have a greater understanding of how the system works, and how to solve your problem without you spending any more money than necessary.