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The Struggle with Home Warranty Companies and your Rental Home

home warranties

We wanted to write this article for any homeowners with existing home warranties or are thinking about getting one. Our team is having an increasingly hard time working with home warranty companies, please read this article in full.

As we are writing this, Lindsay, one of our property managers, is on the phone with American Home Shield and listening to a recording that says “your wait time is in excess of one hour. Please continue to hold and a representative will be with you.” She is merely trying to follow up on a work order that was recently placed.

While we understand that using a home warranty for repairs can be beneficial for you, we have experienced that home warranty companies make it difficult to provide quality service to your tenants. We have gathered input from our staff and other industry experts on the pros and cons of having a home warranty. Here is some of our findings.

What is a home warranty?
A home warranty is a pre-paid, 1-year service contract with a warranty provider that agrees to repair or replace certain items in your property during the contract term. It is not the same as insurance for your home, but it can provide some piece of mind to homeowners on a budget in case major components in your home need to be repaired or replaced. The main areas that home warranties cover include electrical, plumbing, heating and air, and appliances. It does not include coverage for major items like your roof or foundation.  

How does it work?
While prices for home warranties vary by provider and packages, we see the average home warranty at a cost of $550 per year or $46 per month. Keep in mind, an additional service trade fee is still due at the time of service which is between $50 and $100 for each request. If your tenant calls in an issue with the front light and the dishwasher on the same day, the warranty company will send two different vendors and charge two trade fees.

Pros of home warranties for landlords:

  • Can help manage the cost of repairs on what the warranty covers
  • We tried really hard to think of more pros, but honestly we’re falling short!  

Home warranties can be advantageous for new homeowners especially in providing peace of mind. The older your home and its components, the more likely you are to find value in a home warranty. We don’t find that homeowners get the same value in newer properties where repair costs are low. The good news is that the warranty company should take care of the item with no additional charge above the warranty and trade fee call for a normal service repair (i.e. appliance repair, hot water heater repair, etc.)  

The only positive feedback we received is that a home warranty can bring a large return on big ticket items, such as water heaters and new HVAC units. Costs for the owners are fractions of the full price that you have to pay if you do not have a warranty.

Cons of home warranties for landlords:

  • Delayed time for service
  • Does not include preventative maintenance or turnover expenses
  • Home warranties will try to repair over and over again to delay replacement, if at all possible
  • Each policy comes with a long list of exclusions as well as it does not cover anything they consider to be “pre-existing” or with “too much wear and tear”
  • Not set up to handle emergency situations
  • Certain costs are not included in the warranty
  • Can just be a "waste of money" if not used or big repairs do not happen

Delayed time for service
The most negative impact we have found from home warranties on your tenant and our team is the delayed time for service. Inputting a maintenance request can take in excess of an hour. Most warranty companies anticipate a vendor to make contact with us or your tenant within 72 hours. Warranty companies require parts to be shipped from their warehouse and can even further delay repairs. The vendors home warranties assign rarely follow up and we never receive a copy of the work order notes from the vendor.

Home warranty situations gone terribly wrong
We’ve had some terrible experiences this summer with American Home Shield, First American Home Warranty and Old Republic Home Warranty with regards to extended delay times for service. We had two different set of tenants without air conditioner for over four weeks this summer. We had another resident with no hot water for a month! Air conditioners going out is something we try to prepared for, so our company owns three portable a/c units for instances like these. We do not charge the tenants, or you, the owner, for this service, but we cannot loan out our a/c unit for a month, nor does the unit adequately cool an entire home during summer.

Even with persistent follow up, calls to supervisors and our local reps, the home warranty company was unable to get these repairs made in a realistic time frame. To say these tenants were just upset is a great understatement and does not describe the situation well. The property owners had to offer rent credits in all three scenarios. And No, the warranty company does not agree to reimburse or care about their inadequate response. Our management team sent apology notes and gift cards to our tenants. Your tenants do not love your warranty company; Therefore, they do not likely love you (or us).

Another example of a bad experience with home warranty companies comes from one of our homeowners with Choice Home Warranty that was refused a new outside unit even though their vendor stated the unit needs to be replaced. We’ve paid three service trade fees this year and despite the cost of the home warranty, the homeowner is getting estimates to replace the unit outside of the warranty. This is unfortunately more common than the warranty companies would like to admit. They are a business and are here to make money. They will delay replacement as long as possible and then can find a reason not to replace.  

After-Hours Emergencies and your home warranty
Another grave concern regarding the warranty companies and your rental property is that the warranty companies are not set up to manage after hours and emergency services. If you have a home warranty and there is an emergency on the weekend, we will need to work outside of your home warranty. The best example of this is a plumbing emergency. Your home can suffer extensive water damage if a plumber is not dispatched immediately. If we have to shut the water off to the home for an extended period of time in order to mitigate damages to your home, you may be liable to pay for hotel reimbursement for your tenant while you wait on the home warranty. In these instances, you are losing money using the home warranty and it makes more sense to pay outside of the home warranty. Our company has a great relationships with our vendors. Most can provide same day service and will go the extra step to take care of emergencies. You won't have that with home warranties.
 
To sum it up, time is money
Tenants who wait extended periods of time for normal service are unhappy and an unhappy tenant will cost you. It is our goal to ensure all owners and tenants are happy with service and response times are critical in this satisfaction rating. 

If you choose to have a warranty - We need your help
We are willing to work with your home warranty; However, we will need the following assistance from you in order to make it work.

  • If you receive a phone call or email from the home warranty company, you must pass along that information to us as soon as possible.
  • If you make payments directly to the home warranty company, please send us a copy of that documentation once received and paid.
  • First American Home Warranty is now requiring the service trade fee to be paid by a credit card before the vendor will visit the property! We will need you to make this payment as not to delay service. For tax purposes, it’s best that we not place your service fees on our company credit card and bill your account. 
  • As we do not receive notifications for your plan expiration and renewal, you must be responsible for renewing your home warranty. Please check with us before you renew your home warranty so we can advise on different options and companies.
  • Before you purchase a home warrant, do your research and be an educated consumer. Customers expect more from their warranty than it will deliver. Analyze the numbers. If you pay $550, and then have an average of four work orders per year with an additional trade fee, are you likely to make money, lose money, or break even? It may make more sense to set aside money each month in a savings account. You’ll be able to access these funds for any number of reasons including preventative maintenance, turnovers, vacancy, and repairs.

Home Warranty Company Ratings on the Better Business Bureau
We investigated the ratings on the BBB website to size up all the major home warranty providers in our area. If you have a few minutes, read some of the reviews of your home warranty company below. It does not seem we are the only ones struggling with getting satisfactory service. The rating scores are as follows:

  • Old Republic Home Warranty - 3.8 out of 5  Read reviews here 
  • Home Warranty of America- 2.9 out of 5 Read reviews here
  • First American Home Warranty-  2.8 out of 5  Read reviews here  
  • American Home Shield- 2.8 out of 5 (also noted for the longest wait times!) Read reviews here  
  • Select Home Warranty & Choice Home Warranty 2.5 out of 5 (we do not recommend using these home warranty companies as they don’t have adequate service or coverage in our area)

 

Nicole St. Aubin
Realty Masters of FL~ (850) 473-3983
4400 Bayou Blvd. #58B, Pensacola, FL 32503

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11-13-2017
Nicole St. Aubin
Home Warranties
11-14-2017
Pensacola Real Estate Market Statistics and Update!

The Pensacola Real Estate Market is strong! 

We are taking a look back at 2016 Real Estate Statistics.  The Florida Real Estate market, which was known to be hard hit by the recession, is showing continual signs of improvement.  This is great news for homeowners and landlords but not necessarily great news for tenants. 

Let David Keen, Realtor, give you a rundown of some of the highlights of the 2016 Pensacola Real Estate Market.


Here's a summary of what David Keen, Realtor, has to say.

Pensacola Real Estate Market 

  • Home Sale Prices in the Pensacola Area were up about 5% over 2015 Home Sale Prices
  • Inventory is down and supply is limited
  • New Construction makes up a large percentage of inventory
  • Foreclosures and Short Sales are now only about 3% of active sales inventory
  • Average time on the market for properties for sale in Pensacola is sitting at approximately 90 days

With days on the market down along with inventory and supply, sales prices are likely to continue to increase in the Pensacola area.  As David mentioned, the distressed inventory made up nearly 29% of our active inventory just two January's ago and now the distressed inventory is down to about 3% of active inventory. Because so many of the sales comparables were distressed properties, it kept the market and appraisal values down. In comparison, today in 2017, nearly 1/3 of the active inventory are new construction, or brand new, homes.

As we are expecting an increase in interest rates in the coming months, many buyers are using this opportunity to purchase a larger home and sell their old home or deciding to make the leap from renter to homeowner. 

Pensacola Rental Market

average Pensacola area Rental Rates

  • Rental Rates have increased about 3% over 2015 rental rates. While this is not as strong as the improvement for the sales market, we expect tighter inventory to continue to drive rental rates up!
  • The average rental rate in Pensacola is up to approximately $1,100 
  • Rental Supply is limited with nearly 1,000 fewer units on the single-family rental market than five years ago.

What do these statistics mean? The shrinking inventory of Pensacola area rental properties comes from forced landlords who previously could not sell their homes. These hesitant landlords leased their homes, condos, and townhomes out of necessity, not out of desire.  Because of the improving real estate sales market, hestitant landlords are choosing to sell their properties rather then releasing when their tenants vacate.  This trend began in 2013 but ramped up in 2016.  

The increase in rental supply in 2014 comes from a huge increase in investor purchases as prices were down and distressed inventory was high.  Now that it's harder to find affordable investments in the Pensacola area, the investor sales have finally leveled off although demand has not.  We expect even more landlords to sell their rental properties this year further tightening the rental inventory.  Because of these factors, rental prices will continue to increase over the coming years. This lack of inventory and increase in prices is forcing some renters to make the leap to homeownership earlier than they had desired! Pensacola Rental Market supply and demand

Are you interested in building a rental portfolio? We have owners ready to sell their rental properties and know where you can find the best deals on auction sites, with tax deed sales, and with existing foreclosure inventory.

Do you have questions about the Pensacola rental market or the sales market? Reach out to our team for answers! 

David Keen, Realtor

Realty Masters of FL~ (850) 473-3983
4400 Bayou Blvd. #58B, Pensacola, FL 32503
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#1 in Pensacola Rental Houses 

03-02-2017
David Keen
Real Estate Market
03-29-2017
The Right and Wrong Landlord Mindset

Do you have the right mindset to be a landlord

It's important to have the right mindset in order to be a successful landlord. 

Recently, I have seen several stories online relating to violence between landlords and tenants. A tenant was stabbed in the Bronx; a landlord was killed in her house in Clearwater, Florida. It can be hard being a landlord, but it shouldn’t land you in a hospital, a jail, or a morgue.

In most cases, your tenants will rarely take as good of care of your property as you would. Your renters will not pay for maintenance costs willingly and they will most likely not properly prepare your property for the next resident. Your rental is going to have vacancy time and it will cost you money. It is very likely that you will have to pay for a very expensive repair at some point. These are the risks and challenges you accept when becoming a landlord.

When becoming a landlord you must have the right mindset to be accepting of these truths or the entire experience of being a landlord could drive you crazy.

If you go into being a landlord thinking, “I can find the over-achiever, grade A tenants every time!” you will probably be disappointed. 

Another idea new landlords have is, “I just want my property to look like it did when I lived there”, but this is not a realistic long-term approach to being a landlord unless you contribute to keeping it that way. You must put forth effort, money, and energy into maintaining or improving your properties. Landlord Tenant Law does not allow landlords to charge tenants for every cost required to turn over a property for a new tenant.  The majority of tenants will not do routine maintenance tasks such as pressure washing, small interior maintenance, or keeping up with the yard. 

Instead, realize that your tenants are not going to put forth the same effort you may have and incentivize them to do more by equally contributing to routine and preventative maintenance.

Be very appreciative of your excellent tenants.

  • The ones who pay rent on time, keep your place immaculate, plant flowers, and don’t complain or ask for a lot.
  • Send them a thank you card or mail them a small gift during the holidays. 
  • Thank them for preserving your property like you would have and for increasing the property value while they did.

Be appreciative of your good tenants.

  • The ones who paid a week late that one time when their car died, that don’t plant flowers, but that mow the yard timely.
  • The ones that don’t clean right when they move and the walls need a little touch up but everything is intact and well cared for. 
  • By occupying your rental property, they are helping you to gain equity, to keep your credit score up, and to save for retirement.

You can even be appreciative of the bad tenants.

  • Appreciate the ones who call every month with some new major issue because they’re not letting your house fall apart.
  • Appreciate the ones who move in the middle of the lease because they paid rent timely and voluntarily turned over keys so no eviction was necessary.
  • Be appreciative of the ones that stayed for five years even though they were so messy and Florida Landlord Tenant Law says you can’t charge them for fresh paint and new carpet.  Appreciate them because they have saved you months of vacancy costs over the years.

Look at being a landlord as being a small business owner. With revenue comes expeses. 

Routine and preventative maintenance is important for your rental investment and increases the value of your real estate asset. Properties with up-to-date features and in overall better condition will yield higher rents, be easier to maintain, and have less vacancy costs.  

  • Don’t be upset when your tenant calls in routine maintenance, be appreciative of the opportunity to increase the value of your long-term asset in smaller increments over time.
  • It will be a relief when the A/C repair only costs you $350 because it didn’t require a brand new inside and outside unit.
  • Be appreciative when the plumbing emergency doesn’t happen on a Sunday or a holiday and that it didn’t flood your downstairs.

Landlords who invest in real estate with the wrong mindset will constantly be disappointed with their tenants actions and will never appreciate the fact that another person is paying down their mortgage and helping them to build wealth with a real estate investment.

Do you have questions about becoming a landlord in the Pensacola, Florida area? Reach out to our team for honest advice on being a landlord.

Nicole St. Aubin, Broker Associate

Realty Masters of FL~ (850) 473-3983
4400 Bayou Blvd. #58B, Pensacola, FL 32503
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#1 in Pensacola Rental Houses 

03-01-2017
Nicole St. Aubin
Landlord
03-29-2017

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