BEWARE OF HOME WARRANTY COMPANIES. sAVE YOURSELF MUCH HEADACHE.
Posted on 2013-05-31 15:53:56
For the past six years, home warranty service companies have been the No. 1 "worst graded" category by Angie's List members. In 2010, 54 percent of the reviews on these types of businesses received a D or F grade. Members misunderstanding or disagreeing with what their warranties cover and the quality of repair work are cited in the majority of complaints.Understand the fine print
In order to minimize misunderstandings, experts stress the importance of reviewing and understanding a service contract before purchasing a home warranty.
"Like anything else, make sure you shop around," says Tim Meenan, executive director of the Service Contract Industry Council, a national trade association that supports home warranties and advocates the regulation of the industry. "Read what's covered and the exclusions. If you read those two sections, you'll have a good idea if it's a policy you want to buy."
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A home warranty service contract isn't an insurance policy that protects you from loss, but is meant instead to provide service, repair or replacement on a home's appliances and major systems, such as heating and electric. Typically, contracts are good for one year. "It gives people peace of mind," he says. "Lots of folks can finance a service contract but cannot finance a new $4,000 HVAC unit."What's covered in a home warranty?
4 tips to avoid home warranty woes
Home buying and selling tips, trends
The average cost of a basic coverage plan ranges from $350 to $500 a year, with the cost of an enhanced plan adding $100 to $300. Prices reflect not only coverage, but also a company's loss history, which is determined by how often an item breaks down and the cost to repair it. Some home warranty companies offer additional coverage for certain items, such as a well pump or pool, for an extra fee. Regardless of the type of plan, homeowners typically pay an additional service fee ranging from $50 to $75 for each repair job.
Shelton says he feels like he understood the terms of his warranty contract and was frustrated at HMS for only paying for a specific component of the A/C, which wouldn't work unless he replaced the entire unit. "I've paid [HMS] $4,000 over the years, including $50 for every service call," Shelton says. "I would have been better off putting that money in a savings account."
HMS National president Doug Stein declined to speak to Angie's List Magazine. Nine other home warranty companies didn't respond to our interview requests and neither did the National Home Service Contract Association, a nonprofit trade organization comprised of some of the largest home warranty companies.
A spokesperson for one of the home warranty companies told us NHSCA asked its members to refrain from participating in the story, but Arthur Chartrand, counsel for the NHSCA, repudiated that assertion, writing in an e-mail, "Our communique to all NHSCA members ... actually suggests that members reply, but stated, 'All members are free to make their own judgment call in regard to your inquiries.'"
Differing opinions
Twenty-four percent of Angie's List members responding to a recent online poll say they have a home warranty - and many echoed Shelton's sentiments, arguing they're a waste of money. Member Patrick McGranahan of Winters, Calif., says even though his new home purchase came with a warranty from American Home Shield, he found the policy to be underrated.
"I did the math, and I figure you're paying all this money for the warranty and then you pay $50 to $75 for every service call - it really doesn't add up," he says. "Plus, the people they sent to do the work were late and unprofessional. I got real put off."
On the other hand, member Michelle Morgan of San Clemente, Calif., had nothing but good things to say about the contractors American Home Shield sent out to repair her pool and spa, and plans to use them, if necessary, in the future. Gayle Wilson of Los Angeles says she's successfully utilized her AHS plan 10 times in the past five years for repairs to her washer, dryer, refrigerator, freezer, microwave and clogged drains. "I'm delighted to have someone to call when I have a problem," she says.
Nearly two-thirds of members who took our poll say their home warranty came with the purchase of a house. "It's something I recommend on every transaction," says highly rated real estate agent Beth Smith Shuey of Keller Williams Realty in Charlotte, N.C. "But I warn my clients that not everything is going to be covered." Nonetheless, Smith Shuey says 95 percent of her clients who buy a home close on the deal with a warranty included.
The real estate connection
Throughout the country, the real estate industry is closely tied with home warranty service contracts. "It's about liability control," says Mark Finchem, a highly rated associate broker for Long Realty Company in Tucson, Ariz. He requests sellers pay for a home warranty on every contract to reduce their chances of being sued if an appliance or system breaks down. "You're telling the buyer everything you know about the house in a disclosure statement, but what happens to those things that you've forgotten about?" he says.
While home warranty companies often market their services to realty companies, neither individual agents nor brokers are permitted to receive referral fees for promoting one warranty company over the other. "In the past, warranty companies would offer real estate agents a fee from $40 to $75 that was typically paid after closing for each contract written," says highly rated Realtor Jason Bowman of RE/MAX International Inc., in Mason, Ohio.
In June 2010, the U.S. Department of Housing and Urban Development issued a ruling that home warranty companies could not pay real estate professionals for referrals. "I actually feel this is a great thing for our industry and consumers alike because Realtors can offer their customers better advice on warranty program decisions when the financial motive is out of the picture," Bowman says.
Like many Realtors, he relies on his past experiences when suggesting a home warranty company. "If there's a customer service issue relating to a particular warranty company, I won't offer their service," Bowman says. "On the other hand, I'll report positive feedback from past clients to new buyers."
Even with the new rule in place, some agents don't endorse them. "I think home warranty contracts are a good concept, but mislead buyers into thinking that they offer a guarantee on the house," says highly rated Realtor Jen Geisinger of Maple Grove, Minn. "I also think the fine print can be prohibitive to the needs of many situations that buyers are likely to encounter."
Warranty companies speak out
Not every warranty company offers coverage to homeowners nationwide, but the industry is regulated in all 50 states under consumer protection laws. Also, they're required to be licensed or registered by the department of insurance in 32 states, according to the SCIC. North Carolina regulates service contracts under the Attorney General, while Texas regulates them through the state's Real Estate Commission.
Gwen Gallagher, president of Old Republic Home Protection, says her company strives to provide comprehensive coverage, but inevitably some claims will be turned down and could result in unhappy customers. The most common reasons they deny service is because the item, such as a broken window, wasn't covered under contract, or the service, such as replacing missing parts or components, was excluded.
Homeowners also are denied coverage if the item wasn't in good working order prior to purchasing the home. "We don't inspect properties; however, we ask that in good faith, plan holders do not place claims on pre-existing defects," says the 33-year industry veteran. "It's unfortunate when the services rendered do not meet expectations," she adds. "I can speak firsthand of the desire we have, from the top down, to make a positive difference."
To obtain the most value from a home warranty, Gallagher says it's important plan holders read and understand the coverage that's offered, and the limitations. "We've tried to make it as simple and easy-to-read as possible," she says. Old Republic offers coverage in 25 states plus the District of Columbia and plans range in price from $270 in California to $375 in Texas.
Contractor selection
In addition to thorough coverage, providing competent contractors for plan holders is a priority for most home warranty companies, according to industry leaders.
American Home Shield, has a network of 11,000 professionals to service their 1.4 million customers nationwide. Company spokeswoman Nicole Ritchie says contractors are screened during the application process, including a background check. "We believe our customers expect - and deserve - professional service at all times," she says. "However, in the unfortunate event that expectations aren't met, we encourage customers to make us aware of any issues, and we'll take corrective action as appropriate."
Contractors working for a home warranty company often have to meet set mandates before they can work on a customer's home, such as acting and dressing professionally and following specific guidelines for pricing jobs.
"They need to have the proper amount of insurance and any required certifications or licensing," says Eric Brody, customer service supervisor for highly rated Colonial Home Warranty, based in Wilmington, Del. and serving many parts of the country. "And we keep a rating system on our contractors based on feedback from customers. Their rating directly relates to how many jobs they get from Colonial." The company offers three levels of coverage for homeowners, ranging in price from $345 to $432.
Eric Lipp, owner of unrated Patriot Air in Tempe, Ariz., says he works with several home warranty companies, including Colonial, and appreciates the business, but also understands he needs to keep costs down. "When you're a startup company, it's a great way to get free leads," he says. "[Home warranty companies] know what things cost, and they reward contractors who have the cheapest ticket by giving them more work."
Colonial says pricing is one of many factors they use to rate their contractors. "Most contractors are willing to accept the negotiated rates in exchange for the higher volume of work," Brody says.
For the past 15 years, unrated Kings Appliance in Las Vegas has partnered with a number of home warranty companies. "We like that they send us business, and whatever the homeowner needs, we're here to help," says office manager Maria Reyes. Although Reyes advocates professionalism and experience among her technicians, she also says sometimes they have to compromise their service to keep costs down.
Avoiding cost restraints is just one reason some contractors choose not to partner with a home warranty company. "We've been approached by several of them, but it's really not advantageous for us," says Mike Fedor, residential service manager of highly rated WF Hann&Sons in Bedford Heights, Ohio. "They're very cookie cutter as far as repairs are concerned."
Dave Mejean, HVAC manager for highly rated B&W; Plumbing & Heating in Speedway, Ind., doesn't plan on working with home warranty companies either. "Their pay scale is nothing we want to mess with," he says. "They're looking for people to work for little money and customers might not get good, quality work."
I have in the past worked for several Home Warranty Companies. I would never purchase their coverage. These companies limit serious repairs to a few hours and very low pay per hour. Contractors are graded based on denied claims, fast patchup work and minimal repairs. There is no consideration for preventive maintenance since claims are usually denied because of a telephone operator's perception of poor maintenance. Replacement components are to be generic or the lowest cost possible. Contractors usually experience delays getting paid and always there is nickle and diming inorder for the company to pay the lowest cost and provide minimal service to the customer.
Before entering into a contract with a Home Warranty Company check with your local BBB. Check the BBB where the company is registeres and operates.
Keywords: home warranty poor service
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Couldn't be happier with the decision. This year I found some water damage to my home's stucco exterior that was caused by a failed piece of flashing. My homeowner's insurance wouldn't cover it, and it's outside the coverage of my former home warranty too. Because of the forced savings, I have the funds to pay for the repairs without impacting my day-to-day finances.
Sometimes they try new repair companies. The latest one they sent out for our pool pump, I was not impressed with and I requested they send the repair crew from Paradise Pools that had been servicing our equipment previously and that was not a problem. So far, I have had little problem with AHS home warranty, although I understand other folks have. I would like to hear any feedback anyone may have on this issue. Thanks!
They broke a major appliance--of the repair company's own brand!--that I had to replace for six times the amount AHS would give me. And under AHS' own emergency standards, could not repair my furnace for days during an unusually cold spell. One AHS plumber lied to me and tried to collect additional funds on the side, and was so incompetent that he actually had no idea how to fix the problem. I knew the solution but he did not agree, showing both disrespect and ignorance. My actual cost for that repair, by an excellent plumber who came independently to the same diagnosis as I did, was thousands.
Overall, technicians sent by AHS had far less experience, skill, and ability than those with high recommendations on Angie's List. Not to mention that AHS threatened me with collection AFTER a dispute already had been resolved. If I still used AHS and could rate them, I'd give them an F. Home warranties simply aren't worth the paper on which they're printed.
Our biggest problem is that they do not have service people in Pleasanton. I am able to hire a local contractor and pay the contractor and AHS pays me back. AHS has 24 hours to find someone and then I am able to find a local person. We haven't had any problems with the reimbursement as we carefully have followed the AHS rules.
We have the enhanced coverage where they cover usual stuff as well as stove, refrigerator, dishwasher, installed microwave, washer, dryer, etc. My appliances are old and they either replace or repair. I know that when my AC units go out I will have to pay some amounts, but I have spoken with rep and know what my coverage will be. Communication is key--talk with the various companies before you commit.
When I contacted both HSBC and Home Sure of America to request cancellation and return of premiums paid for their violation of the terms of the agreement, HSBC ignored the letter and continued to bill me and Home Sure refused to return premiums for which they provided no service when requested. Letters to the attorney general of both NY and Florida were useless. Fortunately, I found a repairman on Angie's List and he had the refrigerator working within 45 minutes after I called.
The more reputable contractors don't handle warranties because the warranty company does not pay the contractor enough to make a profit. I get quiet a few calls from homeowners and property managers that are fed up with the hassles and want repairs done now. It's also interesting the number of Real Estate people I do business with will not use the home warranty companies for their own homes.
The contractors seems to be trained to try and palm off any repair as due to a lack of maintenance, taking it outside the contract. The appeal process is generally successful but time-consuming and annoying. The best example is my HVAC, installed in 1980. It needed constant service due to coolant leaks and general age.
Over the years, AHS practically rebuilt it (new compressor, fan, heating coil) while I had to rely on fans or space heaters during the repairs. I successfully appealed denials several times before I finally accepted the fact they were never going to replace the unit and I did it myself. Have I gotten value for my premiums? Some years yes, some years no. When it works--usually with smaller repairs--it is great.
On my more recent home with modern appliances, I filed a claim for a built in cooking vent and the guy who fixed it with no problem despite the fact that it was a custom order part and took him 3 days to complete the job. Overall, I think the experience had more to do with the personalities of the contractor sent. In the first case, the guy came, seemed upset to even be there, insisted on getting the $50 fee upfront, and then spent about 3 minutes looking at the unit before declining the order. Was probably on location for 10 minutes total.
I'm sure the insurance company 'loves' him as he keeps the costs down. The second time around, the contractor completely examined the unit before even requesting the $50 upfront fee. Was courteous and through. All that said, I did not nor would not purchase it for myself. I used it for the 1 year it existed because it was 'part of the deal', but let it expire and have been plenty happy with that decision.
As the articles states, it's pretty much a 'feel-good / anti-liability' product for the seller of a property. The real estate agents LOVE it because if there's a problem with the place after purchase (which there always will be), they can say "talk to the insurance company" instead of "talk to me or my seller"
He diagnosed the problem which was the compressor was not working and needed to be replaced. He said he had to call in the information to AHS that afternoon and they would send the replacement compressor to the contractor. That week was quite chilly so I had to order another tank of propane to use my fireplace to take the chill off the living area, plus I had to put extra blankets on my bed. I received a call on Thursday, the 18th from a gentleman at AHS who told me there would be extra charges associated with the repairs.
They would not pay for the capture and return of the Freon, plus there was another charge for the "carry off" of the broken compressor. He also told me the work would be completed on either Monday or Tuesday of the following week (23rd or 24th). Monday morning I called the contractor to set up an appointment for Tuesday because I had doctor's appointments on Monday. I couldn't get through to the contractor, even though I called every half hour for two hours prior to departing for my appointments. When I returned at noon, the contractor's secretary had left a message that she had "just received" my message (at 1138am) and that the earliest they could get to me would be Thursday.
I called AHS to find out why my work order didn't take priority over any new ones going to that contractor. The contractor's sec. didn't say a word about parts being received or not being received. The lady I talked with at AHS on the 26th checked records, then called the contractor. She called me back and told me one part had come in but the second part had not. (When the workers came yesterday, they only unboxed one part, so I'm skeptical about the one and two part story).
Anyway, she also told me that the part was only supposed to be shipped that Monday or Tuesday, not installed on those dates! I spent the Memorial Day weekend trying to find the coolest place to pass the time since the temperature inside my home was 87 degrees. I knew I'd get nothing from the contractor on the holiday so I called their office Tuesday morning (yesterday) to see if the part had been delivered. It had, and they said they'd be over after lunch to install the compressor.
I watched them install it to make sure they did a good job and were conscientious with their work. The contractor told me that if he could have purchased the part from the Carrier distributor in the next town, he could have installed it the day after he diagnosed the problem. He also told me that AHS shipped the compressor FREIGHT, which he did not understand. I've been upset for 2 1/2 weeks due to the poor customer service from AHS. They cared not one iota that a customer was freezing or sweatinig to death, both of which happened to me during the 2 1/2 weeks I waited to have the compresor installed. I tend to agree with those in the article that say a home warranty is a waste of money.
I'm very disappointed in AHS and in the contractor because neither business kept me informed of the situation or the status of the order. When my policy is up for renewal with AHS, it will NOT be renewed. I pay almost $500 per year with a $60 dollar charge for each service call. I expected better service with my A/C problem.
I took off work and waited in my home all day in the sweltering mini heat wave we're having in MD. By 2:30 I began calling the company to no avail. By 3:30 I reached the owner of company assigned. The owner told me he had already been to my home as I had a "blue Toyota" in the driveway. Well, I dive an Acura and my car was in the garage. The owner said he "tapped" on the door and did there was no response.
I asked why he did not ring the doorbell...duh...it works! Needless to say I called AHS and they offered to find another company for emergency service on Saturday...yeah right. Of course they were unable to find a company that would come.
So, I was assigned another company that I had to call on Tuesday evening because I had not heard from them. I was scheduled for a service call today, Wednesday 6/1 (an entire week from initial breakdown and missing another day of work) between 10a-2p. At 2:30p I started call the company again to no avail; then called AHM waited for 25 minutes for a service rep to share that the service tech has not yet shown up.
AHS called the company and didn't get an answer at either number the company provided. However the AHS rep said she left a message asking that the company call me directly upon receiving the message. At 3:48p I called the company and spoke with someone that says I'm still on the schedule for a service call, even though it's almost 2 hours outside my window for service. I'm still waiting in the heat for a service call. I will not be renewing with AHS! They have refused two other plumbing service calls. I'm very leery about the impending a/c service.