Home protection plan helps ease problems of selling, purchasing a house


After digging up enough cash to handle the down payment and numerous closing costs, the least favorite thing for a homebuyer to face is unexpected repair costs for a zapped water heater or built-in appliances.

That's one of the key motivators for buying a home protection (warranty) plan for previously owned homes being offered for sale. The coverage benefits the home seller, buyer and broker.

Typically, a home protection plan, purchased by the seller or buyer, covers the mechanical systems in a home for one year after a sale.

Items usually covered include central heating, air-conditioning, plumbing, electrical, water heater and ventilation ducts, and major appliances. When these items need repair or replacement, due to normal wear and tear, the new owner calls the home warranty company, which dispatches an appropriate technician to correct the problem. A minimal service fee is charged per call -- usually from $25 to $50.

The warranty plan is not an insurance policy. It doesn't cover known pre-existing conditions or damage caused by fire, theft or vandalism. It's designed to repair or replace items that become defective after the sale of a home.

The one-time fee for a basic one-year warranty plan generally ranges from about $200 to $350, payable when the home is sold.

Homebuyers like the coverage because it minimizes their risk of encountering large and unexpected expenses after moving.

Sellers and brokers like it because it protects them from after-sale hassles and possible lawsuits instigated by an unhappy buyer.

As homebuyers and sellers become more aware of the importance of warranty coverage, it has become an increasingly potent marketing tool. A home that is covered by a one-year home protection plan has a competitive edge over a comparable property without such coverage.

Also, unhappy and frustrated buyers tend to file law suits quickly these days when something goes wrong with their newly acquired home. The warranty coverage mitigates this tendency since it's much easier to simply call the warranty company and quickly have the problem fixed.

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