The Resale Home Warranty – Coming Soon to a Home Near You

I attended an interesting class this week titled “Understanding Home Warranties”. This course was put on by the Oakville Milton And District Real Estate Board. Initially, when I received the invite, I assumed the course would be about Tarion Home Warranties for new construction properties. This course was actually focused on a Real Estate trend that has become quite popular in the U.S.: Resale Home Warranties.

The concept is an interesting one. A client purchasing a home can buy a resale home warranty for a year at a time. This warranty will often cover the major mechanical components and systems in the home including the plumbing, ducting, stove, dishwasher, fridge, garage door opener, furnace, boiler and more. The warranties start at $250 per year. These policies are offered by insurance companies and contain stipulations as to the extent of coverage, often dictated by the age of the system in question. The coverage will usually have a deductible for each claim submitted in the range of $50. The policies will not cover pre-existing conditions in the home however there is no qualification of the home in advance.

If a system or appliance that covered by the policy experiences problems, the insured calls the provider to inform them. They will recommend a repair professional for the system, should you not have one of preference. There are limitations on the amount of coverage and the insurer will often provide a cash payout amount if the system or appliance is not worth fixing – based on physical condition or age. While this approach does not cast a protective net over the entire home, it does offer a level of comfort knowing that you have some protection in the event of a major break down during the first 365 days of home ownership.

This approach has generated considerable following in the United States. In California alone 92% of homes sold last year involved resale home warranties. In fact, sellers often provide a resale home warranty as selling feature to the would-be purchasers. A purchaser looking at two comparable homes that are similarly priced may be swayed toward the property with a one year security blanket.

How likely it is that a home owner would use the policy in that first year? Most policy holders make 1.7 claims per year on average. 1.7 visits by a home repair professional each year will justify the $250 cost of the policy. Keep your eyes open readers, I believe the resale home warranty will become much more prevalent in the Canadian real estate market in the years to come. Who doesn’t enjoy some extra cost-effective protection? If you have any questions about this interesting idea please feel free to contact me at 905-330-1241 or rdavison@trebnet.com .

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