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Spring House Hunt: What you need to know about home warranties

Ask the Expert Buying Spring House Hunt
Household kitchen appliances, guarantee and protection concept.
Roughly 65 percent of home warranties are sold to home buyers, sellers, and their agents, according to the National Home Service Contract Association. Adobe Stock

Janelle Emalfarb Gordon, a Chicago-based real estate agent with @Properties, and her husband pay $900 per year for their home warranty. They bought it when they purchased their residence four years ago.

Emalfarb Gordon, who said “things go wrong with older homes,’’ regularly recommends home warranties and will sometimes purchase them for buyers who are nervous or if a deal seems to be going sideways. She likes having the peace of mind knowing they have a number to call if things go wrong.

“I recommend it to my buyers who purchase homes that are more than 10 years old. You just never know what kind of risk-takers my buyers and sellers are’’ when it comes to repairs, she said. “And I think over the long run, it pays for itself.’’

In the four years they have owned their home, they have had two broken water heaters, service calls for their air-conditioning and heating system, a broken heater in the garage, and problems with the oven and refrigerator.

Tallying it up, Emalfarb Gordon said the couple have probably saved $3,000 more than they’ve spent, including the $100-per-service-call fee they pay every time they report a problem.

Home warranties vs. service contracts

Today, millions of home warranties are sold — to home buyers, sellers, agents, or homeowners — with an average price of $600, according to the National Home Service Contract Association (NHSCA). Roughly 65 percent are sold to home buyers, sellers, and their agents. Thirty-five percent are sold directly to current homeowners, a growing trend.

According to Mass.gov, under state laws, existing home warranties are not true warranties; they are service contracts that provide added protection in the event a covered item in the home needs repair or replacement. The state reserves the term “warranty’’ as a guarantee made solely by the manufacturer, importer, or seller of the material, property, or service.

So why are contracts referred to as warranties?

Arthur J. Chartrand, a lawyer who is counsel to the NHSCA, said that when the industry started 60 years ago, warranties “were always sold in conjunction with the sale of an existing home. And the real estate industry referred to them as a ‘home warranty.’’’

Although Chartrand, former counsel to the National Association of Insurance Commissioners, will be the first to tell you that while home warranties are not insurance products, they are often regulated by a state’s department of insurance. That is the case in Massachusetts, which requires all home warranty companies doing business in the Commonwealth to hold a certificate of authority issued by the Division of Insurance. (If you have a complaint about a home warranty, contact the state Division of Insurance at [email protected] or 617-521-7794.)

New- vs. existing-home warranties

New-home builders will typically provide several different types of warranties. A new-home warranty “describes the problems and remedies for which the builder will be responsible after completion of the project, as well as the duration of the warranty and the mechanism for addressing disputes,’’ explained David Jaffe, vice president of construction liability for the National Association of Home Builders.

Builders also will pass along manufacturers’ warranties, so if your roof leaks because there’s a problem with the material, it should be covered. If it leaks because of a problem with the way the home was built, then that may be covered by the builder’s new-home warranty.

But if after a year the water heater breaks, and the warranty has expired, neither the manufacturer’s nor the builder’s warranties may cover it. That’s where an existing-home warranty — more accurately known as a “home services contract’’ — could help.

How do I buy a warranty?

There are so many ways. Sometimes a real estate agent will refer you to a company or give you one, but you can also buy one on the Internet.

In fact, put the words “home warranty’’ into a search engine and nearly a billion results pop up. Many of these will lead you to “reviews’’ that are nothing more than artfully constructed search engine-optimized pages with what’s known in the industry as “lead gen’’ links. In other words, if you click on one to buy a home warranty, that website makes money. There may be no guarantee that the “editor’s pick’’ or “recommended’’ product has been independently tested or verified.

This is fine, but you have to know what you’re looking for in order to get the right product:

Compare plan features. Decide what you want covered (mechanicals, appliances, electronics, pool, hot tub, etc.). Some plans will include heating, ventilation, and air-conditioning system tune-ups; provide unlimited refrigerant for your air-conditioning system; and cover roof leak repairs — as well as code violations and permits. You may also be able to add coverage.

Compare companies and costs. Look at annual and monthly contracts and service call fees. “Just because someone is offering something really cheap doesn’t mean it’s good,’’ Chartrand noted.

Check the financial background of each company. Make sure they are licensed by your state. “Look for companies that have been around, are accredited by NHSCA, and have brick-and-mortar offices, and don’t just exist in cyberspace,’’ warned Chartrand. “You can also ask your real estate agent … they know who to trust and who to utilize.’’

Understand their limitations and exclusions. Not every replacement is covered 100 percent, particularly if you have high-end appliances.

Check the Web for complaints. Type the name of the company and the word “complaints’’ to find reviews. Be sure to read the one-star posts so you know what a worst-case scenario looks like.

What if I need service?

Depending on the company, you’ll either be able to request service online or by phone. You’ll pay the service fee when you book the appointment. A repair professional is assigned and will show up as soon as possible, often within 24 to 48 hours. If a part is required, and the person making the service call has to order it, it could take weeks to get your system up and running again. Typically, you do not need to pay for subsequent service calls.

“The only downside is you have to call a number, and you’ll get an unknown handyman who comes to your house and doesn’t know it. Also, it doesn’t happen immediately. You have to go through the system, and usually someone comes out a day or two later,’’ Emalfarb Gordon explained. “If it’s a real emergency, you’ll have to call a handyman yourself,’’ which won’t be covered by the plan.

Ilyce Glink is the author of “ 100 Questions Every First-Time Home Buyer Should Ask ” and the CEO of Best Money Moves. She also writes the Love, Money + Real Estate column. Subscribe to our free real estate newsletter at pages.email.bostonglobe.com/AddressSignUp. Follow us on Twitter @GlobeHomes and Boston.com on Facebook.