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Warranty contracts gain popularity with buyers

December 04, 2008|By JIM WOODARD/Creators Syndicate

Home warranty contracts are growing in popularity with buyers. Even though they are an added expense when closing a sale, they the reduce risk of incurring a much greater expense during the buyer's first year of ownership.

The older the home, the greater the risk of failure in one of the operating systems or appliances, which makes warranty protection more viable. This particularly applies to the purchase of foreclosed homes.

A bit of basic information: A home warranty contract, like insurance, covers certain elements in the home that are normally not covered by homeowners insurance. Most commonly, warranties cover the home's major operating systems and appliances for one year. Items typically covered include plumbing, heating and electrical systems, most appliances and water heaters.

The one-time fee for a year's coverage is paid upfront. Additional one-year terms can be subsequently purchased if desired by the owners. The initial fee is usually paid by the owner-seller, but sometimes paid by the buyer or broker.

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The seller and broker usually consider it a good investment because prospective buyers find it appealing. In fact, some Realtors advertise that all their listed homes come with one-year warranty coverage. It gives them some leverage over their competitors.

Coverage costs vary from company to company and from region to region. The homeowner usually pays about $50 for each service call arranged by the warranty company.

While available nationwide, most home warranties are purchased in California, where about 90 percent of resale home transactions include warranty coverage, according to the Home Warranty Association of California. During the past year, more than 266,430 warranty contracts were sold in that state alone.

Fees and coverage vary significantly, so it's a good idea to compare prices of companies before buying home warranty coverage. Be sure to read the fine print in the contract. There may be notable exclusions that make the contract less valuable.

Q. Is it possible to lower your property tax?

A. Property taxes for many homeowners have been reduced this year due to lowering of market values in most areas. That's a bit of good news in today's recessionary times.

The assessed value of the property, as determined by each county assessor, is used to calculate the tax amount. That value is generally less than - but tied to - the home's market value.

With property values and tax amounts dropping, many homeowners are complaining to their local assessors that their taxes remain too high. In many cases they are right. If they pursue an appeal, they are sometimes successful in revising their assessment downward.

This trend has triggered a surge of pitches from individuals and firms offering to handle the tax reduction appeal process for homeowners - for a fee, of course. The promotions usually come in the mail or via e-mail. This is a totally unnecessary cost and service in most cases. In most counties, a simple appeal system is set up, making it very easy for individual homeowners to file an appeal themselves without cost.

For more information, or to obtain the proper forms, call or visit the Web site of your county tax assessor's office.

Q: Is renting a viable option for homeowners who have a problem in selling their home?

A: A growing number of homeowners who experience long delays in selling their home are opting to rent their property to cover their ownership costs. Also, many owners feel that if they rent their home for a couple of years or so they will not only be able to cover current costs, but will be able to hold off selling until values rise again, allowing them to realize a profit from a future sale.

"When homeowners must move out of their home, whether the reason is a job transfer, a financial problem or something else, many are choosing to rent rather than continue reducing the price of the property until it sells," said Realtor Jim Merrion. "It's not a risk-free strategy, but if a seller thinks it is likely that home prices will rebound in the next year or two, it can be an effective way to deal with a difficult situation even if the monthly costs of continued ownership are more than the rent received."

Another reason for renting a home is alleviating potential problems in leaving a home vacant, particularly in the winter. It can be expensive and risky. It should be noted that if the residence is a condo, there may be restrictions in the association bylaws related to renting the units. Check that out before offering the property for rent.

Copyright 2008 Creators Syndicate Inc.

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