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2015-11-16 08:33:32
Does a Home Warranty Cover Known Conditions?

f you’ve ever sold a home that includes a home warranty you probably know how they work. A home warranty company will repair or replace systems and appliances in a home that fail from normal wear and tear.

If you need to brush up on what exactly a home warranty covers or share that information with your client, you have come to the right place (visit this website for even more information). However, there is a stipulation in most home warranty contracts that says “known conditions” are not covered. Many homeowners assume that means if they don’t know about the problem, then the repair or replacement should automatically be covered in the contract.

Unfortunately, that isn’t always the case. Educating your clients on what a known condition is and why a home warranty contract might not cover one can save you and your client a lot of stress.

What is a “known condition”?

When your buyer opens up his or her new home warranty contract, they will see a section about what is and isn’t covered by their home warranty company. This portion is important to read through, so the buyer isn’t caught unawares.

Usually, a home warranty contract will state that it does not cover repairs and replacements on problems that are known prior to the date of coverage. (This is usually the day of closing.)

Although it might sound like it, this doesn’t always mean that the home warranty company will provide coverage on damages or defects in which the buyer isn’t aware. Instead, it means that if the problem has been going on since before the home was purchased, the home warranty company might not be able to cover the repair or replacement.

Think of this in terms of insurance because, essentially, a home warranty is just appliance insurance or home repair insurance.

If your car was totaled and then you called an insurance company asking for them to insure your car and then pay for the damages, it wouldn’t be covered. Why? Because your car was already totaled before you purchased the insurance.

Now, if you bought the insurance and you then got in a wreck and totaled your car, the insurance company would be much more likely to cover your claim.

This idea is the same with a home warranty. With this home repair insurance, if your appliance or home system is already broken before purchasing the contract, then it wouldn’t be covered.

However, there are certain situations where this rule does not apply. If the system failed before the date of purchase, but there was no way for the home seller, buyer or Relator to detect it, then many home warranty companies will still cover the repair or replacement.

This variable might change from home warranty company to home warranty company, so advise your client to check their contract.

For example, in Landmark Home Warranty‘s contract, an unknown condition is defined as “if the condition would not have been detectable by the buyer, seller or real estate agent through visual inspection or a simple mechanical test.” This is why it is important for buyers and real estate agents to complete their due diligence. (In the interest of full disclosure, I work for Landmark.)

As you know, due diligence is the investigation or audit of an investment. The inspection of a home by a qualified contractor to let the buyer know what condition the home and its systems and appliances are in is an example of a due diligence.

Although some home warranty companies don’t require a home inspection to be filed, it’s still a great idea to get one completed and give it to them. A home inspection will let a buyer know what needs to be repaired in a home. The buyer can then either negotiate on price with the seller or ask the seller to fix the problems before moving into the house.

Once the problems are repaired, and the inspection and subsequent proof of repairs are filed with the home warranty company, then a new homeowner is in the clear. Any claim he or she opens on a system or appliance in a home should be covered by the home warranty company.

That’s why it is crucial to hire a trustworthy home inspector and read through the home inspection. If the home inspector advises the real estate agent and homebuyer to get a second opinion from a qualified contractor, then that is part of the due diligence. A home warranty company will most likely not approve a claim if an inspector noted further examination should be completed on a system or appliance.

A home warranty is a lot like home repair insurance. If a buyer makes sure that the home is repaired before purchasing, or they know that the pre-existing conditions that are noted in the home inspection won’t be corrected by their home warranty, they will better understand what they can expect from their coverage.

Buyers can get repairs and replacements on their failed systems and appliances for hundreds less than the standard price. This can save their budget and protect their home’s inner workings. As their real estate agent, make sure you help educate them — after all, an educated client is a happy customer.

Whitney Baum-Bennett is the SEO specialist at Landmark Home Warranty. She creates informative articles and graphics about everything from buying a first home to how to fix your toilet; see more of her content here.

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