Landlords considering a home warranty for their rental should know what property managers know and why you are better off not using one for your investment property.
When property managers send a trusted/known vendor to a managed home, they are familiar with their prices, workmanship and how they have conducted themselves in homes and with tenants. Not all vendors work well with tenants, who can be a mix of personalities themselves. Some are easy to work with, some not so much.
Trained vendors know not to divulge repair advisement to tenants who always have a different opinion than landlords on what needs repaired verses replacement. They have proven to be ethical, and are trusted not to take advantage by misdiagnosing repairs for profit.
Many times known vendors will throw in freebies. They are familiar with our expectations, lease, and safety concerns that can affect landlord liability. They know they will earn more work by doing a good work for a fair price and will go back at no cost if necessary later if something goes wrong. Home warranty vendors do not have any skin in the long-term game.
Warranty providers select their vendors by the lowest bidder
Home warranty companies are a business and their purpose is to collect fees while repairing as little as possible, as often as possible. By all appearances they select their vendors by the lowest bidder.
Warranty vendors are not usually customer service oriented, because they don’t need to be. They don’t work for the homeowner, the property manager or tenant, and they tend not to aim to please any of the above. This is where the real difference comes in, and why we struggle with wanting owners to have choices but also wanting to maintain our reputation and personal level of customer service as well as adhere to landlord/tenant law.
System replacements are rare, like winning the lottery rare
Many owners imagine that once they buy a home warranty, they will have no further maintenance costs, and that is NEVER the case. Warranties typically have many exclusions to coverage in the fine print.
Vetted Vendors Versus Warranty Vendors:
- Exclusions affect your bottom line. Many repairs end up not being covered, even though you paid the yearly cost plus the per-visit service fee. Their vendors will offer to make the uncovered repairs, but at astronomical prices, because they know most people acquiesce, simply because they are already there and have no time to compare. Cha-ching!
- Warranty vendors typically have horrible ratings, no internet presence or are recently established. They use warranty work as a way to generate business that they don’t have based on a solid reputation and longevity in their field. Many do not stay in business long, so any new system (rarely achieved) warranty isn’t likely to be there when needed. Many times warranty vendor workmanship is later found to be poorly done or not up to code.
- Warranty vendors may be unavailable for weeks, meanwhile landlords are required to make timely repairs and on necessary systems within days, especially heating/cooling and appliance repairs which are common. Warranties are never an option for emergencies like gushing water or leaking HVAC systems, unless you don’t mind costs like secondary damages, unhappy tenants and insurance deductibles.
- Warranty vendors are rarely on time and require 4-hour arrival windows, seldom offering a “call ahead” option. This is hugely inconvenient for tenants with obligations like jobs and families – just like you. Unhappy tenants do not stay long-term. If a parts are not in stock, multiply the inconvenience to your tenant.
- A good handyman can make several common household repairs at a single visit, but warranty companies don’t offer such vendors. The only assign electrical work to an electrician and plumbing to a plumber, etc. This means you could have several different contractor visits when a tenant requests repairs. Each vendor requires a 4-hour arrival window for your tenant an average $100 service fee per contractor from you. A handyman usually charges a fee based on what can be done in an hour and will work with your tenant to visit at a convenient time for both parties.
- Many warranty vendors require the service fee upon arrival. Good luck getting a tenant to front a fee for you, especially given the level of service they are dealing with along with possible lost wages to accommodate that 4-hour arrival window for YOUR home repair.
- You rarely have the same vendor service the same system twice. This results in “blame games.” In 2018 we had an HVAC vendor diagnose a system as low on Freon (not covered under warranty) then months later, the next vendor out diagnosed the system as having too much Freon, requiring removal (Freon removal is also not covered!) Later that season a third vendor insisted the coils were too damaged to even hold Freon. Meanwhile, that tenant had an awful summer, hated the owner and our team.
- Owners mistakenly believe they will get free new systems, but system replacements are rare, like winning the lottery. Expect systems to be repaired repeatedly over a period of years, inconveniencing tenants over and over with many 4-hour windows and systems that run poorly in between repairs, while you rack up services fees, that can surpass what you would have paid for a new system earlier and also made your tenants happy. Repair expenses are tax deductions folks.
Example: Our team had an AHS home warranty vendor come to replace a stackable washer, but when the vendor arrived to install it, they refused to unstack the dryer to install the new washer. The tenant, a single mom with kids was not equipped to move the appliance for the 2 men, nor were we told that it would be necessary ahead of time. This required a 2nd appointment PLUS a 2nd vendor to attend the repair to remove/re-stack the dryer for the appliance provider. Let that sink in. The 2nd vendor (2 men) had to wait outside the home for the arrival of the warranty vendor, to unstack/re-stack/remove & dispose of the old washer for an appliance vendor! This added several hundred dollars to the repair cost. Couple that with the service fee and yearly cost, and they could have bought a new washer from the start. It took 3 weeks for what should have taken 1-2 days by landlord/tenant law. This angers the tenant, can be unlawful and does not save money. 3 visits for the tenant = 12 hours of their time. No money was saved.
Owners that have tenants that stay for long periods of time enjoy more stability and make more $$$$. Tenant turnover is costly. If you have a well-qualified tenant that takes good care of your home, pays rent on time and follows the terms of your lease, it is not wise to torture them with a bad warranty service that likely doesn’t even save you money.
Always, if you have questions, we’ve got answers! Mary K. @ Stephanie Clark Property Management
Tags: Home Warranties, Investment Property, Property Manger, Rental Home, Scams