Rise in Bank-Owned Homes Calls for Closer Look at Home Warranties

CONCORD, Calif.--(Business Wire)--
As the number of bank-owned existing homes mounts in California and a concurrent
number of home systems and appliances remain dormant, the Home Warranty
Association of California (HWAC) says it is more critical than ever for
homebuyers to understand what is and is not covered by a home warranty.

"As bank-owned property transactions increase, so does the expectation that a
home warranty covers everything under the roof. Unfortunately, too many
homebuyers are moving into their new homes with high hopes that the home`s
systems and appliances are in top working order and, if not, that the home
warranty company will be responsible to fix those that are not operational. It`s
a common misunderstanding, particularly for first-time homeowners, that leads to
upset buyers and frustrated real estate agents when a service request is
denied," said Billy Jensen, president of HWAC.

Jensen said it`s important that the home buyer read the home warranty contract
thoroughly to understand what is covered and is not covered. A one-year home
warranty contract costs between $250 and $450, and generally covers a home`s
major systems and appliances. It shouldn`t be considered as a fix-all for every
home repair.

"A home warranty is based on the premise that the covered systems and appliances
are in good, safe working order at the start of coverage. So, if it wasn`t
working properly before the home warranty coverage began, it won`t be covered by
the home warranty company," Jensen stated.

Jensen further explained that the home warranty industry is seeing an increase
in the number of service requests after the move-in date for plumbing, water
heater, and heater problems being denied because upon diagnosis the malfunction
would have been detected if the utilities had been turned on prior to the close
of sale.

"Had the utilities been on at the time of inspection, the malfunction would have
been detectable. And since the service issue existed prior to the start of
coverage, it is not covered by the home warranty. Instead, it should have been
an item for the buyer and seller to discuss and possibly negotiate," Jensen
said.

Jensen also emphasized that a common misunderstanding with a home warranty is
the meaning of "unknown pre-existing condition." This refers to a defect or
malfunction in a covered system or appliance that would not have been known to
the buyer, seller, agent, or home inspector by a visual inspection and/or by
operating the system or appliances.

Conversely, he continued, a "known pre-existing condition" is a defect or
malfunction that could have been found by a visual inspection and/or by
operating the system or appliance. Known defects are excluded from coverage
until proof of repair is received by the home warranty company.

"Unfortunately, many properties are sitting vacant longer and in some cases the
utilities have been shut off making it much more difficult to diagnose and
understand the difference between an unknown and known pre-existing condition.
Yet, just because the gas, electric or heating was turned off, and the visual
and/or simple mechanical test could not be performed is not an adequate reason
for defining a condition as an unknown pre-existing," Jensen said.

The Home Warranty Association of California continues to make educating home
buyers and real estate agents a high priority, he concluded.

About the Home Warranty Association of California (HWAC)

The Home Warranty Association of California is a statewide organization of home
warranty companies representing approximately 95 percent of contracts sold in
California.

Member firms are 2-10 HBW Warranty of California, Inc. American Home Shield of
California, LandAmerica Home Warranty, Fidelity National Home Warranty Company,
First American Home Buyers Protection, and Old Republic Home Protection Co.,
Inc.

For Home Warranty Association of California
Billy Jensen, 925-521-7146
Art Ansoorian, 805-653-1648

Copyright Business Wire 2009