Every time you turn around, a new scam pops up.
If you’re looking to prevent becoming the victim of the home warranty scam, then this information is for you.
This article outlines how the home warranty works, why people believe it’s a scam, and how you can prevent it.
What is a Home Warranty?
When you purchase a home, the seller usually pays for a Home Warranty. In essence, the seller is “guaranteeing” the condition of the house after they sold it to you and you possess the home.
Let me explain.
You bought a home which has plumbing. The seller states during escrow that the plumbing works fine. Your home inspector says the plumbing works fine. You move into the home and 2 months later, your shower, your sink, your toilet all back up. The plumbing isn’t draining.
That’s when you use the home warranty.
You call the home warranty company, place a trouble ticket for your plumbing. Then the plumber arrives, snakes the sewer line, and suddenly your shower works again. All covered under the warranty.
So what’s the down side?
Let’s put this in context.
Your Automobile Warranty Works Similarly
At some point, you purchased a new vehicle. Bumper-to-Bumper warranty. If something goes wrong, we’ll fix it.
Your car breaks down. The tow truck driver brings it to the dealership. The mechanic says to you “These repairs aren’t covered under warranty.” Your mouth hangs open in disbelief because now you pay for the repairs.
As it turns out …
… your car had no oil in it. The engine went dry, seized up and no longer works. The warranty requires that you perform regular maintenance on your car. If you properly maintain the vehicle, then the warranty applies.
You claim, “I didn’t know I had to do that!” It doesn’t matter. It’s in the fine print when you purchased the car. You must maintain it.
In other words, it’s in the fine print.
How the Home Warranty “Scam” works
Your plumbing doesn’t work. At the end of your shower, water submerges your feet by 3 inches. You call the home warranty company and they send a plumber out.
The plumber arrives and says “Sorry, this is not covered under your warranty. You must pay for the repairs yourself.”
Well, you need the repairs done so you agree. The plumber fixes the problem, you pay and he leaves.
Why did the home warranty company not pay for the repairs?
What does that mean?
The drain clean-out is a cap to the plumbing whereby if you unscrew the cap you have direct access to the sewer line.
Doesn’t all homes have clean-outs at ground level?
No. Older homes typically do not. How you access the sewer line in that case is to climb up onto the roof and run the snake down the vent pipe.
As it turns out …
… the home warranty company does not cover plumbing access if it is not at ground level. If the plumber must climb onto the roof, the home warranty company does not want the liability in case he falls.
Remember the “fine print”? The home warranty company gave you a booklet which outlines exactly under what conditions they will cover various repairs to your home. If you or your home do not comply with the fine print the home warranty is not applicable.
That’s not all…
Two weeks pass. One day, you receive a bill from the home warranty company. Usually for $75 or $100.
Wait. What? Why did I receive a bill? The home warranty company didn’t do a thing!
It’s the fine print once again. If you place a trouble ticket, and the work cannot be completed due to the fine print, then you still have to pay a fee.
Hence the curse of the home warranty scam.
Believe it or nuts, that’s exactly what happened to me.
Sadly, that’s not all.
Some friends of mine had their sink back up. Water refused to drain and it was disgusting. They called the home warranty company, placed a trouble ticket, and a plumber was sent out. The plumber stood and looked at the sink. Then he asked to see the clean out. My friends lived in a condominium complex so they took him into the garage to show him the clean out.
The plumber announces “I will have to snake this entire complex. The home warranty does not cover that.” He packs up his equipment and he leaves without doing a thing.
In speaking with my friends, they tell me what happened. I asked them “Does your shower work?”
Yes, it does.
How about the toilet? Is the toilet backed up?
No, it works just fine.
What about your neighbors? Are they complaining about their plumbing?
No, they said everything works fine.
Face-palm against the forehead.
Here’s the deal.
If no one else’s plumbing experiences problems, there is no reason for the plumber to snake the entire complex. The only thing clogged was the sink. Unless the plumber is completely inept, he probably cancelled the job just to collect a check from the home warranty company. After all, the home warranty company pays him whether the work is done or not.
Who fixed the sink? Me. Total time was 10 minutes and it cost my friends a pizza.
Two weeks later, a bill arrived. Why? Because you are billed whether or not the work was performed. This is the home warranty scam in action.
Yes, my friends complained. Loudly. No, the home warranty company did not budge.
Is this really a home warranty scam?
First, read the booklet that your home warranty company gives you. It outlines exactly under what conditions the home warranty applies. If your plumbing is backed up, and you do not have a ground level clean-out, then don’t call the home warranty company.
Second, if you call the home warranty company, submit a ticket and later discover that they do not cover the cost of the repair then they still charge you a fee. That is also stated in the booklet.
Read the home warranty booklet.
But what about the contractor who invented a reason to walk away?
Unfortunately, that’s not something the home warranty company can control.
I made a free, home buyer guide for you that will help you avoid bad home warranty companies and home warranty scams. This book puts you on the path to achieving your real estate goals.
It outlines, step by step, exactly how the home buying process works along with how to work with your home warranty.
Click on the button below to get copy of the home buyer guide.