Preventing Lawsuits - Homeowners Warranty

When a seller inks a deal with a buyer, the buyer expects the utilities and major household appliances to work.

So if the home is sold during the heat of summer, next winter when the thermostat is switched over to heat and nothing comes out of the vent but cold air...

...you can imagine the reaction.

It is the seller's fault. Or the agent's fault. Or somebody's fault.

So the buyer calls his agent who calls the listing agent who tracks the seller down to their new home.

"The heater is broken and the buyer is demanding you replace it," says the agent.

Of course, the heater worked perfectly well last winter, so the seller replies that it will be a cold day in... (well, in the house) before he pays for something that isn't his problem any more.

The listing agent passes that message back to the buyer's agent who passes it back to the buyer and the buyer doesn't believe a word of it.

Obviously, the heater didn't work last year and the seller did not disclose it. The buyer has a brother-in-law who is an attorney and now lawyers are involved.

This actually happens.

Anyone can sue anyone, even when it isn't "fair." Since it costs money to defend against lawsuits, the seller generally gives in and replaces the heater, even when it was in perfect working order last winter. Or the dishwasher, or whatever else has gone wrong.

All of which can be easily avoided through the purchase of a Homeowners Warranty or Home Protection Plan, which is basically

is basically a different kind of insurance.

If the electricity, plumbing, heating, air conditioning, water heater or major appliances break down, the insurance company fixes it.

No muss, no fuss, no lawyers, no wasted time on repetitive phone calls filled with mutual distrust, flaring tempers and bruised egos.

The cost?

For houses under 5000 square feet (which covers most houses) the cost is usually less than $300.

Sellers should price this insurance into their cost expectations when pricing their home. It is not much to pay for peace of mind and the knowledge that when your house is sold, you really will be done with it. Even when the buyer doesn't ask for the warranty, sellers should provide it.

As for buyers, after the first year is up, most warranty plans allow for extensions. In the "olden days," this was considered a waste of money, but things are more expensive now.

The key ingredient in all this is that the seller must warrant that everything is in good working order when the house is sold. So if the buyers insist on a Home Warranty and the seller refuses...

...the buyer is going to wonder, "What's broken?"