Buyer Insights

Think warranty, but choose wisely

Home buyers these days are picky, preferring properties that are in move-in condition, with no major flaws that will require expensive repairs in the foreseeable future.

Most also are looking for some sort of guarantee - insurance, if you will - that appliances and mechanical systems, if they break down, can be returned to working order without digging deeply into pockets emptied of the cash needed to buy the house.

One option is a home warranty, typically bought by the seller to cover the first year after the house is purchased. At year's end, the home's new owner has the option of renewing the warranty.

"With inventory as tight as it is, most sellers prefer not to offer [a warranty] up front but to keep it as a possible negotiation tool, if needed, after home inspection," said Marilou Buffum, an agent with Berkshire Hathaway Home Services Fox & Roach Realtors in Chestnut Hill.

"If many appliances in a home - dishwasher, washer, hot-water heater - are older, I will encourage a seller to offer one up front because it is an extra insurance policy for a buyer," Buffum said. It's also an advantage to advertise a property as having a one-year home warranty, she said.

Nancy Pearl, of BHHS Fox & Roach Realtors in Cherry Hill, said sellers will offer warranties, "but usually only if the agent talks about the benefit of offering one to a buyer." A home warranty can help mitigate a prospective buyer's worries about a dated heater or central air conditioning system and "help bridge the gap between an old, but working, system and the buyer's concern that they will have to spend money to keep it running or, even worse, replace it in the first year," Pearl said.

Robert Acuff, of Re/Max Services in Blue Bell, is a big believer in high-quality home-warranty companies. "They provide peace of mind for the buyer and give the seller protection when home-inspection issues arise, if there is an item that may be at the end of its useful life," he said.

Fifteen percent of listings have home warranties, Acuff said, and "I would guess roughly the same on getting the buyer one when we represent them." Warranties tend to be more popular in "slow markets, when sellers are having a hard time attracting buyers, and it is looked at as an attractive extra," said Ruth Feldman, an agent with Weichert Realtors/McCarthy Associates in Mount Airy.

If the seller provides a one-year home warranty, however, don't assume that if something breaks, it will be repaired in record time. Home buyers need to read the fine print, to be sure that what they expect to occur does.

The average annual cost of a home warranty, depending on which state you live in and whether you occupy an attached or a detached property, is $350 to $500. Warranties are customized to those factors, consumer groups say.

Each warranty will specify which types of repairs are insured, the limits on coverage, and deductibles, if there are any. Many home-warranty policies have deductibles of about $100 or the cost of a repair, whichever is less. The deductible applies to each repair. In addition, if more than one thing breaks down simultaneously in separate categories - a toilet and a light switch, for instance - the repair person charges a separate fee for each.

Typically, a home inspection is not required before buying a warranty, but existing issues related to improper maintenance may not be covered. Experts recommend that buyers get a home inspection at the time of the purchase because a pre-existing problem can be corrected before settlement.

Many warranties cover some, but not all, components of systems such as furnaces or appliances, regardless of age, manufacturer, or model. The best advice is to comparison-shop and read carefully before you buy. Consumer groups and others say the volume of complaints they receive put the value of home warranties in question. Home buyers need to be aware of what these policies cover and what they do not.

By Alan J. Heavens, Inquirer Real Estate Writer, 11/8/15


6 Things to Know Before You Sign a Rent-to-Own Contract

They can be paths to ownership for those who can't qualify for mortgages right away.

Rent-to-own, also known as a lease option, is a contract that allows renters to lease a property and, at the end of the lease (usually one to three years), have the option to purchase the home at a predetermined price.

Ideal candidates for a rent-to-own option are potential home buyers who dream of ownership but are also concerned they haven’t saved up enough cash for a down payment.

As a renter, you must be cautious before you sign a rent-to-own contract. There are many stipulations within a contract, so make sure you understand the lease options.

Here are six things to know before you lease a property with the option to buy:

1. Determine a fair sales price. Under a lease-option contract, you’re the only person who has the option to buy the property during the stated period.

Although you can usually buy the home at any point during the term of the contract, the sales price is locked in.

You may have locked in to a great deal if the home goes up in value during the lease term. On the other hand, you could end up paying more for the home if it depreciates and a set price was locked in for a higher amount than what the home is worth when your lease-option is up.

2. Complete a home inspection and document any necessary repairs. As with any home purchase, the condition of the home should be reflected in the price. Take photos to document the condition.

3. Verify whether there are any liens against the property that will affect your home purchase. You don’t want any argument over who owns title to the home.

4. Spell out the exit clause. Make sure the contract specifies exactly what happens if you don’t exercise your option to buy the home at the end of the lease.

5. Ensure all payments on the property are made. Make sure mortgage, taxes and insurance responsibilities are clearly spelled out.

6. Consult a professional. As always when purchasing real estate, it’s important to hire an expert to help you navigate the process and protect your interests.

Someone seasoned in rent-to-own contracts can ensure you’ve specified everything in writing so that you understand the contract and, ultimately, complete a successful transaction.

By Patricia-Anne Tom,, 1/8/15


Homeowners' Top Five Regrets About Buying

5) Poor school system, 70.15%

4) Not enough bathrooms, 8.2%

3) Neighbors, 8.35%

2) Lack of storage/closets, 9.2%

1) House is too small, 15.5%

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