About Real Estate: Inexpensive home warranties benefit sellers, buyers alike

The cost of a home warranty is relatively small when compared with the protection it provides both parties in a sale.

DEAR MR. MYERS: We are getting ready to put our home up for sale, and the agent we have hired wants us to offer a one-year home warranty on the property. She says the warranty would help the home sell faster. Maybe it would, but we don’t think we should have to pay the warranty’s $375 cost, because the policy would only benefit the buyer, not us. What do you think?

ANSWER: I think you should follow your agent’s advice by agreeing to buy the $375 home-warranty policy. Offering such a policy could indeed make your home sell faster by providing the buyer some peace of mind. It also could save you lots of additional money and time if something goes wrong after the sale closes.

A typical warranty policy provides for the repair or even replacement of built-in appliances, electrical systems, the water heater and furnace, most plumbing and a handful of other items that might break or wear out. Protection for the roof, a pool or other components of the home can usually be added for an additional fee.

You’re incorrect when you say that such policies “only benefit the buyer.” Let’s say you sell the home and the automatic dishwasher or furnace breaks down shortly after the buyer moves in. The company that provided the warranty would pay for repairs or replacement, which would almost certainly exceed the $375 you paid to purchase the policy in the first place. You would not be forced to pay for the repairs yourself, and you wouldn’t have to worry about the buyer dragging you into court over the bill.

Though $375 might seem like a lot of money, it’s actually a fairly small amount when you consider how much protection a good policy provides to both parties in a sale. The fact that homes covered by such warranties typically sell faster is an added bonus.

DEAR MR. MYERS: Is there a difference between a “title search” and “title insurance”?

ANSWER: Yes. A “title search” is a comprehensive search of a home’s chain of ownership and other property records, which is usually performed to determine if the seller has the clear legal right to sell the house. The search helps to ensure that there aren’t any claims against the property that the seller doesn’t know about or has failed to disclose to a buyer. Searches commonly uncover long-forgotten claims, such as a lien filed against the property years earlier by a creditor or a court judgment that awarded an interest in the home to a former spouse or distant relative.

Even if the search fails to uncover a problem, most lenders won’t issue a mortgage to buy or refinance a property without first having the homeowner or buyer also pay for “title insurance.” The insurance policy protects the bank against losses that could be caused by problems that the title search failed to uncover. For example, the policy would reimburse the bank for its losses if it was later discovered that part of the home stood on a neighbor’s land.

If an analogy helps, think of a title search as you would a smoke detector: Both serve as early warning signs of trouble. Title insurance works more like fire insurance because it reimburses the policyholder for losses after a claim has been filed.

DEAR MR. MYERS: My father died last year. My mother still lives in the family home, but she barely gets by on her monthly Social Security check and would have a very difficult time paying the $2,800 property-tax bill that recently arrived in the mail. Does the government run any programs that help older people or widows pay their tax bills?

ANSWER: Nearly every county or state operates some type of program designed to help older homeowners cope with their annual property-tax bills. Some of these programs provide money-saving exemptions, others offer payment deferrals, and a few make low-income seniors exempt from paying property taxes altogether.

I cannot give you specific information about your mother’s situation because your letter does not mention where she lives. Your best bet is to contact the county assessor in her area for help. The phone number should be on the property-tax bill itself, or it can be found by looking under the “Government Agencies” heading in the white pages of her local phone book.

David W. Myers’ column is distributed by Cowles Syndicate Inc.