Amy Hoak's Home Economics: What to know before buying a home warranty

By Amy Hoak, MarketWatch

When attracting buyers to their homes, sellers will often throw in a home warranty for a year to sweeten the deal. And its often an effective incentive.

But over the past decade or so, more current homeowners have been using home warranties year after year, according to Art Chartrand, counsel for the National Home Service Contract Association.

A home warranty is a service contract that commonly covers the repair or replacement of your homes appliances and systems, including your heating and air conditioning systems.

People use them for the convenience of being able to call one number when an appliance breaks, without having to research service providers, he said. Others like them as a budgeting tool, figuring that the costs of a contract will be well worth it if three appliances die in one year, for example.

Sounds great, but heres the rub: Home warranty companies are also some of the most complained about companies on Angies List, a website where consumers can find reviews of local service providers. Top complaints are regarding what is covered and who is sent out to do the work.

Heres one horror story: Two days after Heidi Linzt bought a house in Santa Monica, Calif., the water heater went out. The home warranty company sent someone out to fix it, and the repairman ended up damaging the gas line. When someone from the gas company came out to inspect the situation, he confirmed the potentially dangerous situation. It could have been horrific, Linzt said.

Still, she has home warranties for the rental properties that she owns in Las Vegas, something that she says saves her time. And she loves the company that shes working with now.

Its really about understanding what youre getting, said Angie Hicks, founder and chief marketing officer of Angies List. Its a personal decision. It can be an alternative to saving up the money [for maintenance and repairs], but you need to know what youre getting and what is covered.

The cost of a home warranty will vary by company, but often averages about $500 for one year, Chartrand said. When a problem arises with a home component that is covered by the warranty, youll also pay a $60 to $75 service fee when a contractor is dispatched to your home, he added.

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Amy Hoak's Home Economics: What to know before buying a home warranty