10/23/2024
This hot new trend may not be so hot after all âŚ
Home Inspection Company Warranties Might Ruin Your Real Estate Business
We offered warranties for years; it was a cornerstone of our marketing, messaging, and entire business model.
It was who we were as a company. As we grew and did more and more inspections, we learned that this was a huge mistake. We were allowing our business model to be controlled by third-party vendors that did not have the same care and concerns for our clients and our real estate partners.
The warranties end up costing about $30-40 per inspection. Hereâs the problem with that. Allegedly, they cover roofs, sewer lines, mold, structural, and WAY more. Yet, the warranty you buy from a reputable local warranty company covers way less and costs $500-$1000. These warranties don't cover water damage, mold, structural, etc. Insurance companies charge $1000's per year, and they cover catastrophic losses like fire, mold and water damage. (not all insurance policies cover mold.)
So, if a warranty on your house is kinda pricey, and insurance is $1000's per year, how can all that other stuff be covered for $30-$40? How could that financially work? When you look at the financials, it doesnât make financial sense... unless the warranties arenât really what you think they are.
So, we understand when you see an inspection with a warranty, you think it's pretty cool. But what you might not know is that these warranties have the potential to ruin your future referrals. This might seem counterintuitive, but let me explain how that's possible.
As a smart agent, it makes sense for you to think, âIâd like my client to be protected!â But unless youâve done enough homes to have had an actual large problem come up, you might not realize how it will all go down in the real world.
The Warranty
They hardly cover anything, but that makes sense when you realize how cheap they are. It gives everyone a false sense of security. Most items that could ever come up after the inspection are not covered. If you read the fine print of these warranties, coverage is minimal, at best. e.g. only covers visible plumbing - so if your client springs a leak behind the wall, not covered. The warranty companies have an out on almost everything. There are deductibles, limits, caps, and a way to get out of paying most claims. Just read the online reviews.
In the calendar year 2021, we paid the warranty companies well over $100,000 for the protections, they paid out about $5000 to our clients, and usually only after long battles. They paid out about 3% and caused us WAY more headaches than they solved.
The Warranty Company
Horrible customer service makes us all look bad. Most of the customer service from these warranty companies is horrendous. Your clients sit on hold for 30-40-50 minutes each time they call. It could take 6,7,8,9, or 10 months to even get a $500 check that is clearly warranted. Itâs intentional. Itâs the first roadblock to paying a claim.
And then begins the typical runaround, many, many phone calls, and being required to submit copies of ridiculous paperwork. They have every roadblock possible to prevent making a payout. And even then, if your client does get a check, they will likely end up frustrated that their claim wasnât FULLY covered.
The Inspector
As a company that provides amazing customer service and strives never to miss anything, we are great at helping home buyers and agents understand the condition of the home at the time of purchase.
The reality is that the inspection is a moment in time, and it isnât financially feasible for the inspector/inspection company to take on every possible problem that might come up after the inspection. They are inspection companies, not insurance companies.
A well-trained inspector with modern software with video, modern training & technology, and tools shouldnât miss anything anyhow.
These warranties are marketed to inspectors as protection from them missing something. Experienced, well-trained inspectors donât have that problem. And the inspection report is a snapshot of time during the home-buying phase, not a guarantee for the future.
And PS, if you tell the warranty company, the inspector missed something, they say, âWell, then, that isnât covered.â
Your Client
The entire thing sets up your client for massive frustration and tons of wasted time which makes us all look bad. Your client is upset, disappointed, and let down. They blame their agent and the inspector/inspection company. Even if they get a check, it never is the full amount, and they still end up disappointed.
Your Business
You, as their real estate agent, and we, as the inspector did a great job getting the client through the home buying portion of the transaction, making sure they didnât inherit any problems, unknowingly.
Now fast forward and we are post-closing, and a client is now calling YOU about a new problem. They are now in the homeownership phase and are still looking at the inspector and the agent for services that they are not in the business of providing. We want to be helpful and service-oriented, but we canât take on every problem for every house that we were in for 2-3 hours.
You donât want clients calling with every little problem. You canât help them. We canât help them and the warranty companies have proven not to help them. It just creates an uncomfortable situation, one which was totally avoidable.
Conclusion
These warranties have put the inspector and their realtor partners where they donât belong, in the homeowner phase of the transaction.
Things happen with homes, they need to be fixed, maintained, and cared for. Thatâs all part of homeownership. If something catastrophic happens like a large water leak or a fire, or a huge roof leak, that is an insurance claim, which charges $1000âs X 1000âs of homes.
If a small amount of money is spent on something that looks good but only ends up causing headaches and wasting everyoneâs time, itâs best not to waste money on such a thing.
The bottom line is that if the client feels like they are protected in some way and actually, are not, it's a problem for everyone. If we ever came across a warranty company that had good customer service and delivered on the advertising and marketing promises, we'd consider working with them. Until that day comes, we don't want to overpromise and underdeliver.
Real Story #1
The client had a leak after the inspection which was a new leak and ended up with water damage and mold damage, both of which should be covered by different warranties offered by the warranty company.
The inspection report had photos, videos, and thermal images of the area in question, so we know for a fact that it was not present at the time of the inspection.
The client had 6 months of going back and forth with the warranty company before calling us and telling us we were frauds.
The owner of the inspection company called in and finally got a $500 check dispersed, even though the damages were much more. The warranty company denied the mold claim, even though there was a mold policy as well, saying that the mold was behind the wall even though it was obviously from the new water damage, not something that was missed during the home inspection.
Real Story #2
A supply line break should have been covered by the warranty company. It took a ton of digging and exploring the entire underground supply line to find the actual break in the sewer line. The tag line for this warranty is âWeâll dig it up and fix the problem.â
Instead, the warranty company only covered the actual break which was of course a very inexpensive fix, all of the actual cost was in finding the problem. Tons of time was wasted by the client, the inspection company, and the realtor trying to understand why it was such a small amount of coverage for what ended up being a large bill.
Real Story #3
A client sprung a plumbing leak out of a second-floor shower drain. It was clear in the inspection report, since there was a video of the area, a video of the plumbing being run, and thermal pictures of the area, that this was a new leak.
Tons of phone calls and paperwork by the client and he was told after months of wasted time, that it couldnât be covered, since it was behind drywall, and therefore the inspector couldnât have inspected it.
The inspector went to the house, called the top people at the warranty company, and showed them the videos and the thermal pictures. It was plainly a new leak. Having 15 years of experience with the warranty company, they reluctantly paid out. But get this! They paid for the leak to be fixed and left the drywall repairs to the client.
So, letâs be clear, that client was not happy, even though he got a check. Neither was the inspector and the inspection company.
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We have many more stories than this. The reality is that these warranties are putting inspectors and their realtor partners where they donât belong, in the homeowner phase of the transaction, and making us all look bad.
We donât want to see you get burned if something goes wrong with one of your buyers and they were promised the moon, only to find out the opposite is true. After 25+ years we know the difference between a few mistakes and hiccups, and a trend that was killing our business and our customer service with our clients.
If you want to have an amazing and friendly inspection that covers a TON more than the State and National minimum requirements so that your clients know exactly what they are buying, then Bradley Home Inspections is the ideal inspection partner for you.
