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Home Warranty for a Rental Property: A Worthwhile Investment Or Not?

By: Steve Hembree
February 19, 2021  | 

Property owners believe that having a home warranty for a rental property is a great idea and is more cost effective. Well, let me tell you that, this is far from the truth. What Management One has seen, over the last 30-years of property management, is that home warranties are more of a nightmare than a benefit to homeowners and tenants. Home warranties work well for your personal property or newer homes but are bad news for rental properties and the tenants living in them.

Home Warranty Inclusions

Most of the home warranty policies will include Heating and Air, Plumbing, Minor electrical, dishwashers. However, you can upgrade to a premium policy. This will include appliances, pool pumps, roof repairs, sprinkler systems, and spa tub motors. Your typical home warranty range in price from $350-$800 per year which breaks down to approx. $30 – 70 per month.

Now, most warranties have a deductible or service trade fee of $69 per item to $125 per item on top of the yearly price. Say you have a dishwasher that breaks down and a backed-up sink you will have to pay two deductible fees, making the minimum fee for the contractor to come out $138. Most likely this will not include the cost of parts, that gets tacked on as well.

Home Warranty Denials and Exclusion

The home warranty company has a slew of exclusions that tend to leave the door open for a denial of the claim. Based on what we have seen, we have compiled a small list of items that a home warranty has the right to deny a claim for a repair.

  • Pre-existing problems
  • Outdated HVAC system
  • Code violation
  • Lack of maintenance
  • Incorrect installation
  • Poor maintenance

This list can go on and on for what they will/can deny coverage on, rendering your policy useless in getting repairs completed on your rental property.

When it comes to plumbing, the warranty will cover the repair but will not cover any drywall opening or concrete opening. Let’s say you live in an area with the severe weather conditions and your pipes freeze, this too is not covered under your home warranty policy.

Unnecessary Hurdles to Overcome

Residents expect repairs to be done right away and could care less about the home warranty holding up the repair. With a home warranty company, there are many layers to getting a repair done. Resident calls into management company – Management company calls home warranty – Home Warranty company issues work orders out to repairman – Repairman calls a resident to get it scheduled. This outline can delay a repair for up to 2 days which causes the resident to become irritated. If it is a pricey repair, the home warranty company will want a 2nd opinion. Here lies another delay on the repair. While it is true, you can place a request online with a Home Warranty company; this is not feasible for a tenant to handle or a property management company.

Then there is the issue with paying the deductible. Most Home Warranty Companies require payment for services rendered before even going out to the property. I don’t know about you, but paying for a service that is not yet completed, makes me a little nervous. Making this yet another hurdle to overcome just to get a simple repair completed.

Resident Dissatisfaction with Home Warranty Companies

As the management company, it puts us in a sticky situation because we have no control over repairs. We don’t know who is doing the repair, no accountability for the repair to be done timely and correct. This hurts management company with low satisfaction rating from the resident.

Satisfaction is the #1 priority for most management companies as the customers (owners and residents) happiness is important to us. With poor maintenance, many residents will not renew their lease. When a resident doesn’t renew their lease owners, in turn, elect to cancel their management contract with us. This is why having the right people in place to take care of maintenance is key to any management company's survival.

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Here at Management One, we have created a unique process for handling repair requests. The resident can go online and place a maintenance request at their convenience. We receive the work order and process it quickly, assigning it to the vendor that is licensed to handle the repair. Take that same broken dishwasher and backed up sink example, it would be assigned to one plumber that can handle both repairs, resulting in only one trip charge.

Contractors are required to contact the resident within 4 hours of receiving the work order; they must take before and after pictures proving the repairs are completed; payment is rendered after we have verified the work is completed.

Satisfaction guaranteed- we survey every resident that submitted a work order. We want to make sure the contractor was on time, dressed for the job, completed the repair, and cleaned up afterward. If there is an issue with the repair or service, we handle it internally promptly. On the flip side, if the work was done right, on time, etc. we recognize the contractor for doing a great job.

These things add up to increased tenant satisfaction, in turn, they stay longer in your home. Decreasing vacancies, saving you money on needless deductibles for repairs that will most likely get denied, and ensuring repairs are actually completed.

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