Home warranties are a big selling point when buying or selling a home and why not? The way home warranties are presented to homeowners gives the perception that you will pay a nominal fee each year and never have to pay full price again for home repairs. This is partially true and if you live in the home yourself there is value to a home warranty. Depending on your plan’s deductible you can receive considerable savings for unexpected repairs. However the risks start outweighing the rewards in a rental situation.
Like you expect your tenant to live up to his responsibilities in your home, you plan to live up to yours as a landlord. It 
may seem like common sense, but the more understanding and cooperative you are with your tenant in most cases it will increase their good will towards you and encourage them to treat the home as if it was theirs, which is one of your goals. So what does it mean to be a “good landlord”? This means providing the home in an acceptable condition for move in, granting reasonable requests and addressing repairs in a timely fashion. (McGrath Real Estate Services, Inc. does not recommend conceding to every tenant request just to gain some good will but there is a benefit to being reasonable.) The last point is the reasoning behind our recommendation to not have a home warranty. Home warranties prolong repairs and oftentimes require multiple trips before the job is satisfactorily done. Below are two recent and prevalent examples of McGrath Real Estate’s clients’ home warranties gone awry:
- McGrath received an emergency repair request for an air conditioning unit that was not functioning. While this is not considered an emergency, we do try and prioritize A/C requests to alleviate discomfort of the tenant. The property was identified as having a home warranty. Dave Buckingham, head of the Repairs Department, contacted the home warranty company and informed them of the issue, at which point we were informed that this particular contractor was a week out on maintenance calls and would not be able to go to the home for at least seven days. When they finally did visit the property, the contractor found that a dirty air filter caused the air conditioning to malfunction. The warranty company would not pay to have it fixed because this issue was not under warranty. The unit was still not working, 10 days after the initial request. McGrath then sent out one of our preferred contractors who had the problem fixed and the tenant was charged.
The relationships that McGrath has made with our contractors over the years allows us to make our requests a service priority. McGrath, now managing over 650 homes, offers a huge supply of potential business for our preferred contractors and while our vendor policy is in place to protect your interests, it does provide several benefits to our contractors including quick payment upon receipt of their invoice.
Our contractors are also keenly aware of determining whether the repair is a defect or tenant caused and will inform us of their professional opinion of who should be responsible. As you can see from the above example, not only was the issue not fixed in a timely manner, upsetting the tenant who had no A/C in the summer for two weeks but as the owner, you still had to pay a deductible for the initial warranty that did not cover the issue.
- We received a repair request for a broken dryer. The home was identified to have a home warranty so the warranty company was called. The contractor went out and determined that the dryer vent was dirty and just needed to be cleaned. This was done and assumed that the issue had been resolved. A couple days later the tenant reported that the dryer was still not working. When we sent out one of our contractors he determined that in fact the dryer had a defect and would need to be replaced. Again, the owner paid a service charge for an incorrect diagnosis, the tenant was charged for cleaning the vent which turned out to not be the issue and the repair would take another week to be completed.
When a contractor receives a work order from a warranty they only receive a repair deductible typically between $60-100. The reality is this makes contractors working with warranty companies look for the “quick fix” instead of identifying the actual issue and correcting it. All of our contractors sign our vendor policy which states that not only do we require them to provide us detailed before and after pictures to prove the repair was done, but if it is determined later that they did not perform the job correctly and to our satisfaction, we can leverage our relationship with the vendor to go back out and bring to our standard. McGrath holds all of our contractors to a high standard and are constantly implementing new policies in our Repairs Department to ensure that repairs are handled professionally, quickly and at a good value price point. To learn more about the Repairs Department read the Spotlight on the Repairs Team.
We could go on with several more examples but in the end home warranties in a rental home tend to cost the homeowner more than if they had relied on the property manager’s contractors. McGrath understands the appeal of the home warranty and appreciates your desire to keep the home in working order while you are away, but we believe that a home warranty is not the best way to accomplish this. Our job is to protect your interests and through years of experience we know we can offer our clients the lowest prices at the highest quality. If you ever have any questions about a home warranty or the management of your home, please contact our Dave Buckingham of our Repairs Department at Repairs@McGrathRealEstate.com
I conceive you have observed some very interesting points , regards for the post.