By Maura Sullivan

Home warranties can be an important and useful tool in the real estate industry. It may be the reason a buyer chooses one home over another: the seller is offering a home warranty. Maybe the buyer decides to purchase one if the seller is not offering a warranty as an incentive. Sometimes an agent will pay for a warranty for the buyer out of their own pocket because they know how important a warranty can be and the peace of mind that having one brings their client.

A home warranty is different from homeowners insurance. A home warranty is a seperate policy that normally covers items inside the home such as appliances, plumbing, heating/air conditioning systems, etc. But having a warranty in place doesn't necessarily mean that protection follows. It is important to be aware of potential pitfalls when dealing with home warranties.

First, most warranty companies will ask for a copy of the home inspection report or a walk-through sheet when investigating a claim. They need to be certain that the item being repaired through a claim was actually in working order on the day of settlement. When a seller and buyer sign off on the warranty application, they are also representing to the warranty company that, to their knowledge, all items are in working order. So even if everything was "OK" during the walk-through, it is VERY important to fill out the walk-through sheet and give a copy to all parties.

Next, there can be confusion as to who needs to make a claim under a warranty. Let's say a seller pre-registers their home (or has an active warranty already in place), and after contract, but before settlement, the dishwasher goes on the blink. The proper party to report this would be the seller (at the time of the problem) and NOT THE BUYER after settlement. Also, agreements between the seller and the purchaser to "fix a home inspection item" or "walk-through issue" through the use of a warranty can negate the warranty's coverage for that particular item. It is better to deal with repairs and such as they come up and NOT AFTER SETTLEMENT.

Remember, not every warranty company treats a seller's pre-registration the same. For instance, some warranty programs require the seller to pay a "registration fee" with the pre-registration. Other companies don't collect until after settlement or not at all.

It is VERY important to note that not all warranties are alike. Be sure you know what items are covered under which program. Certain programs may be better for you than others. For example, some warranties charge extra for washer/dryer coverage, but may include roof repairs (up to a certain amount) in their standard premium. Some programs have higher deductibles than others. Maybe the deductible is an important issue for you. It is always good to read the warranty and understand what is covered before you decide which one to take. With new programs coming into the market all the time it can be difficult to keep up with them so discuss warranty programs with your Realtor.

Lastly, KEEP THE WARRANTY IN A SAFE PLACE. It is always a good idea to post the toll free number along with your account number in a readily available area (I have mine taped to the inside of my pantry door.) Most warrany companies insist you call them immediately when something breaks down so they can send one of their certified contractors out to assess the repairs needed. Usually if you call a repairman out to fix an item and then submit the bill to your home warranty company with the expectation that you will be reimbursed, not only will they NOT REIMBURSE you, but to add insult to injury, they will "void" that item from your warranty coverage. This can be a VERY costly error on your part.

Read the fine print and understand your policy guidelines. If you play by the rules, so will they.