They used to be called "Home Warranties", now they're generally referred to as "Residential Service Contracts"... but what exactly are they and why the name change?
When a pre-owned home is bought & sold in Texas, often a "Home Warranty" or "Residential Service Contract" is put in place. These policies are generally an attempt to cover household items for one year from the date of home sale. The coverage varies from appliances (dishwasher, hot water heater, A/C, etc.) to plumbing stoppages, termites and more. The extent of the coverage, and quality of service, varies greatly with the company providing it and the particulars of the policy you choose. This leads me to why the name changed: Many felt that "Home Warranty" implied that everything was covered (like a new car or new home warranty). In fact, items that are deemed to have been improperly cared for or maintained are frequently not covered. An important note: This determination is often left up to the provider. This is why the name changed to "Residential Service Contract" and why some providers have begun to offer "No Fault" coverage (coverage for improperly maintained items or those items with previously unknown issues). Of course, such coverage is usually an upgrade or add-on to the basic coverage. Ultimately, a good real estate agent ought to know which companies his clients have spoken highly of and be able to share that with you (I know I keep track of this info.). A few examples of companies offering Residential Service Contracts (or RSCs) are www.AlliedHomeWarranty.com and www.EverythingResidential.com. For the complete list of companies licensed to do this type of business in Texas, you can go here: http://www.trec.state.tx.us/licenses/rsc_info.asp.

So who pays for this coverage, what does it cost and who does it cover?
Sometimes this coverage is paid for by the Buyers, more often the Sellers pay for at least basic coverage. The price for a RSC (basic coverage) usually runs between $300 and $400. Of course, this can vary widely (especially once you start adding on optional coverages (like for a pool or spa, termites or washer/dryer, etc.). So, if it generally covers the home only AFTER the sale, why would a Seller even consider paying for it? Well... Imaging that your home has been sold, and that the dishwasher breaks a week later. Not your problem, right? After all, you sold the home to someone else. Be careful... the Buyer may try to make a case that you knew about the faulty dishwasher and didn't tell them. Guess what's coming next? You guessed it, they want YOU to pay for the repair. While you might win in a court of law, wouldn't it be great if it never came to that? With a RSC in place, more often than not, the Buyers tend to call the provider, pay a small "Trade Call" or "Service Call" fee (generally $50-$60) and get the dishwasher fixed without ever bugging the Seller. Ultimately, you can see that the coverage or a Residential Service Contract can help protect both parties. Also, some companies offer "Seller Coverage" that covers the home while it is listed for sale. After all, who wants to deal with a costly repair on a home they are trying to get rid of?

In summary, I like to look at Residential Service Contracts (or "Home Warranties" for those stuck on that terminology) kind of like today's health insurance. It may not cover everything, but it's generally better than not having coverage. If nothing else, for a small co-pay (or that $50-$60 "Trade Call" fee) you can generally at least get the problem diagnosed and, just maybe, get it fixed all-together.

Ryan Cave, The "Caveman"
Truth, Honor & Personal Integrity
214-789-9366
www.CaveRealty.com