Home Warranties Companies Are Mostly Worthless and Realtors Are Part of the Problem

Are Home Warranties Worth It?

It’s got a home warranty, but it isn’t worth the paper it’s written on.

This is probably the one and only time I’ll write about home warranties, so I guess I better kill two birds with one stone. I’ll share my disappointing experience with American Home Shield so that you never have to deal with them, and then ask the larger question: are home warranties worth it?

A home warranty is what it sounds like. Anything that goes wrong with your home, that isn’t a home insurance issue is typically covered under a home warranty. There’s an annual premium (around $350) and typically a deductible or base service fee (around $50) you need to pay each time someone comes to your home. Things typically covered by home warranty: HVAC units, kitchen appliances, plumbing issues, etc. When there’s a problem, the warranty company sends one of their contractors out to fix the problem.

If you hate rants skip this next part.

American Home Shield Warranty Proves Useless For Us

You guys know we purchased a new home last Summer. The home was just over ten years old and the offer of a home warranty for free (paid for by the seller) was somewhat of a selling point. No worries, right?

Upon moving in we noticed that the dishwasher and oven weren’t working 100%. The oven wasn’t cooking food all the way through (just burning the bottom) and the dishwasher was leaving a white substance on the dishes and just wasn’t cleaning thoroughly.

So, we called American Home Shield and what proceeded was one of the worst service experienced I think I’ve ever had. I’ll spare you the details. Here are the highlights:

  • Contractor (N & K Appliance) showed up late to every appointment. They always missed the four hour window. I swear to you I am not exaggerating that.
  • Three appointments were never kept. No call. No apologies after either.
  • Our oven was put back in lower than where the builder had placed it, leaving a gap.
  • One contractor showed up with an rude attitude on two separate occasions. The second time he was rude to Mrs. PT and I had to give him the People’s Elbow (okay, not really, but I thought this rant needed lightening up).

After all of this we called American Home Shield and their response was, we’ll put in another request to the same company. The SAME company. I said no I’m tired of dealing with them, that’s why I’m calling you, and repeated the list of offenses above. No help. The American Home Shield service rep literally mocked me by asking, “well have you called about this problem before?” A question she knew the answer to. My choices at this point were to pay another $60 for another contractor or try again to work with N & K Appliance. There is no way in heck I’m going to have those people back in my house, so we’re done.

In the end we still have an oven that doesn’t cook properly and a dishwasher that doesn’t clean our dishes. Agh! Oh, and we’re out $60.

Are Home Warranties Worth It?

What do you think about home warranty companies? Odds are if you’ve used one before you’ve probably got a pretty strong feeling about them. Home warranty companies have led the list of most complained about companies on AngiesList.com for several years now.

If you’ve never used a home warranty company before then you’ll probably get exposed to one the next time you buy or sell your house. Real estate agents encourage sellers to offer them as a way to give the buyers a little more assurance. Agents likely receive a commission to push these on the sellers. Thus, unsuspecting new home owners who aren’t going to look a gift horse in the mouth, will gladly take them up on the offer.

Thus, the b.s. spiral keeps these poor performing companies alive. As long as there’s a new homeowner there’s another taker for a “free” home warranty.

If you’ve found a home warranty company that you like doing business with, you should probably consider yourself lucky. Or you probably purchased your own and did your research about who was a good company. As with any marketplace, if people are free to make their own choices and they are spending their own money, a better product or service typically is the result. I’d be willing to bet American Home Shield has about 95% of their policies purchased by sellers.

In conclusion, if you’re dead-set on buying the home warranty, do your research and find a solid company. If you can be convinced otherwise, just start a savings account for home repairs and find a trusted local handyman to help you when things break. If you’re buying a new home soon, don’t let the real estate agent give you some line about how they got that added in as a perk. It likely isn’t a good thing at all. In fact, you may just end up like me, out $60 and still in need of repairs.

Alright, time to give me your opinion. Are home warranties worth it? Have you had a positive or negative experience?

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Last Edited: March 9, 2013 @ 12:30 am
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.


I agree with Mike, I think this was more of a case of getting tied up with an unprofessional home warranty services company than some thing inherently wrong about the home warranty concept as such. I guess the only lesson that needs to be learned from your experience is that, never go for a home warranty contractor, just because your realtor suggested. Like when we scout for any other service provider, a detailed inquiry should be done and get the feedback about them from the existing users.

Philip Taylor
Philip Taylor moderator

 @vinbais Yes, my situation was anecdotal. It would be impossible for me to represent an entire industry with my experience alone. That's why I shared the Angie's List press release above. Warranty companies are proven to be bad performers as a whole, and I believe it's partially due to the Realtors who push them on sellers. If that didn't exist, there would be far fewer poor performing warranty companies.

Mike D
Mike D

WHen we had to use our warranty back in 2006 for a broken hot water heater, we thought it was the greatest thing ever.  They came out, looked, and went and got a new one and installed it.  All in a day.  For just the $50 copay at the time. 


Seems like the problem you had was more of a contractor problem and that warranty company may not have had too many options for contractors in your area.  I do know that statisitcs say that you will rarely ever need it your first year.  Most of the time a "good" home inspection would have at least picked up on the incorrect temp of the oven.


And, realtors often do make a comission, but it is usually around $30 and that comes along with about an hour or so of written documentation that has to be done and sent to warranty company.  Its so not worth it, that I've never taken the comission.



Philip Taylor
Philip Taylor moderator

Glad you had a good experience. Yes, the contractor was a big part of the problem, but I didn't get frustrated until my warranty company told me I had to keep going back to them or spend $60 to use another company. Plus, any good warranty company isn't going to work with contractors like that. Thanks for sharing your commission data.

Money Life and More
Money Life and More

My girlfriend's dad was convinced we should buy one when we bought our house. My response was I can self insure and not waste my time and money with a crappy company. He didn't get it but I had a feeling they did exactly what you said. Sorry you had to go through that.