Housing Trends 2011

A Bigger Role for Home Warranties

No, this isn't a call about where housing prices are headed next year.

Rather, it's an observation that home warranties are becoming a bigger part of real estate sales.

Background

Local utility companies have offered home warranties for years now.

The basic plan typically covers the home's heating plant (forced air furnace or boiler), water heater, fridge and stove; premium coverage add the washer, a/c, dishwasher(s), etc., most often on an ala carte basis.

Such plans have also been a fixture of residential real estate transactions for at least five-plus years.

The most common situation: a home with older -- but still functioning -- mechanical's, where the owner wants to reassure a cash-tight Buyer, but also not bear the expense of preemptively purchasing several new appliances.

Instead, popping $400 or so for a home warranty has been a terrific compromise.

The appeal of such warranties has been further enhanced by the fact that payment is deferred until the home sells, when it is deducted from (buried in?) the home owner's sales proceeds; and the coverage can be assumed and renewed for subsequent years by the Buyer.

"Opting In"

As home warranties have grown in popularity, three developments have accompanied them.

One. Express mention of home warranties in the standard Minnesota purchase agreement.

So, there's now a clause, 2 years old, addressing whether or not the sale is accompanied by a home warranty, and if so, who's paying for it.

Two. More companies entering the business, and as a result, better pricing.

Locally, amongst utilities, Xcel Energy has been revving up to compete with Centerpoint Energy.

On the private contractor side, HSA, HMS, and several other companies write such policies.

"Leak" vs. "Roof" Coverage

Three. Home warranty policies are evolving and tightening up.

Until recently, private contractors offered a "deluxe" home warranty that, for an extra charge (natch), covered the home's roof and foundation.

However, such coverage was subject to both a deductible and a $2,000 ceiling, and required a private inspection.

Surprise, surprise, those limitations and caveats weren't exactly trumpeted in bold print.

To avoid misunderstandings (and lawsuits), both HSA and HMS now explicitly bill this feature as "leak coverage."

P.S.: And no, slapping a home warranty on a dilapidated home with shot mechanical's isn't a way to get new ones for cheap: all such policies are subject to strict "preexisting condition" clauses.

Told "No," But Hearing "Yes"

Showing a Home
Without Permission

Showing a home without permission is a big MLS no-no: any Realtor caught doing it is automatically on the hook for a $1,000 fine.

But the operative word is "caught."

Unless the homeowner happens to be home, it's one of those transgressions that you'd guess frequently goes undetected.

And even if it is, it's up to the client to "press charges," with assistance from their Realtor.

That means filing an ethics complaint, and documenting the allegation with evidence that the showing was rejected, and that the listing agent's electronic lockbox was accessed by the offending Realtor (mechanical lockboxes generate no such log).

A certain Realtor active in the west 'burbs' is very lucky that I have especially gracious clients, and accepted an apology from him rather than having him fined $1,000 (he was showing multiple condo's in my client's building, and apparently, wanted his clients to see the full range of choices. When he unexpectedly found my clients home, he told them a baldfaced lie that he had a confirmed showing.)

P.S.: memo to MLS: I'd actually recommend a smaller fine; $1,000 is so draconian that I'm guessing many wronged home sellers (like mine) decline to impose it, or fear some kind of retribution if they do.

P.P.S.: want a guaranteed way out of paying that $1,000? Write an offer on the property.