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Warranties and What’s Behind Them

Some home inspection companies advertise the “free” warranties they provide along with their inspections. Sounds great – until you read the fine print.

Usually, the ones providing these warranties are fairly new in the business and are looking to get a leg up on the more established companies in the area. You’ll see things like “90 Day Sewer Warranty” or “30 Day Appliance Warranty” or several others up to full home warranties. Please, if you use one of these companies, read the fine print. Many of these add on services are not worth the time it took to read them. Others are merely a way to access your personal information for additional marketing. A few are legitimate, but they are rare as unicorns.

At a home inspectors’ conference, one of the speakers was from one of these home warranty companies. He actually bragged that in the previous year, they had 50,000 customers sign up at $100 per client. That is $5 million in gross income. He went on to then brag that in that year, they had hundreds of claims, nearly all of which were denied, but they did have to pay for one dishwasher. Not a bad gig if you can get it? Total income $5 million ($5,000,000) and total expenses in the neighborhood of $300 for a new dishwasher and installation.

This same speaker went on to add that once you are one of their customers, they then market your information to some of their sister businesses, at an additional profit to them. They would get you signed up for other extended warranties; such as plumbing, AC service contracts, etc.

Are all warranties bad? My experience has be that very few extended warranties have been worthwhile. Cell phones, tablets and washing machines are the only ones I’ve personally paid for that have been worthwhile.

But some of these warranties are “free” and why not use them? Most of these free warranties are of the 30 to 90 day variety. They did cost the inspector a few dollars, but that is part of his cost of doing business. Think about this; from the time you have your inspection until you close on your home and move in will typically take 30 to 45 days. What is going to go wrong with your sewer lines or your appliances while they are sitting unused in the home waiting on you to move in? OK, some of these are for 90 days. Still a safe bet that if they were working at the time of inspection, that you’ll get at least another month or two out of them.

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