J U N E  S P E C I A L :    H  O M E  W A R R A N T Y  S C A M S !

Buyers of homes today are almost always induced to buy a Home Warranty Protection Plan. Every real estate firm and their agents will always use the terms  "peace of mind" when discussing  this kind of policy. But does the Buyer ask what the policy covers or what the claims experience is from a Consumers perspective? Almost never!

How about the Realtor who sells the policy and makes a commission off the sale: can he/she assure you that the firm that issues the policy that he hands you at Closing is reliable and will respond in a timely manner and really protect you? The answer is almost always NO! They immediately say that they have NOT heard of anyone making a claim on the insurance! A good basic Home Warranty Policy begins at about $399.00!       

Coupled with the Home Warranty Scam is another scam that has become   very popular: the HOME INSPECTION Service. As usual, the Home Inspector will cost the Buyer at least $400!

Both of these new services are designed to give you a sense of confidence and "peace-of-Mind"! Let me assure you that neither service will do you any good unless you have a Real Estate Agent who personally knows something about the reputation of these service groups or individuals. Most do not! Very few of us ever know whether our car insurance is any good until the day we report our first claim! The American Consumer is a trusting soul -- foolish, too!

Every Realtor likes to offer these "comfort-building" items because it gives them a couple more pieces to push around on the chess board of Buying and Selling property. That means that they will tell the Buyer that it is a good service and besides we can get the Seller to pay for it -- a nice plus! What could be better in this country than Something For Nothing? How about Nothing For Something!!!!! 

   WHAT TO DO ABOUT THESE TWO SCAMS

The two things that gripe me about these services is that, being relatively new, many of the Home Warranty people are small fry in the insurance market. By definition, INSURANCE is an unregulated business activity. The Federal government has no control over the major insurance industry and many state governments do not have much influence over what is a fly-by-night industry! There are major exceptions to that nasty statement!

As for the Home Inspection people, most of them are former tradesmen, barely above the handyman level! They get their Card or Certificate by filling out a form and sending it to a state department usually the Labor Department. The Card does not certify Competence! It certifies that he filled out the form and sent it to the state, paying a tidy fee! In the bigger cities, Inspectors will be degreed engineers do such work part-time!

So, what can a new couple who is buying their first used home do about this jungle of Scam & Fraud? Follow the items below:

1. Specifically, ask about the quality of the Home Warranty Service and what Consumer Affairs groups say about that carrier.

     a. Do they limit that actual pieces of equipment in the house that is protected?

     b. Is there a limitation on  "pre-existing problems or conditions"?

     c. Is there a Deductible and how much? On each Claim or one-time-a-year?

     d. Is the firm part of a larger corporation or is it just a schlock outfit (i,e,, a hole in the wall operation!)?

     e. Does he/she speak English?

2. How long has the Inspector been in the business and what is his reputation in the Real Estate community? Does he have any formal engineering experience that relates to home construction, etc?

3. Then go to URL http://www,consumeraffairs.com/homeowners/   

4. Look at a minimum of four Home Warranty sources and at least three Biographic Sketches of Inpectors you can choose.

What is not to like about these services?

1. Filing claims become a nightmare! Every insurance company no matter how glitzy and big, hates to pay a claim!

2. Inspectors will always find enough wrong -- even minor stuff -- to justify their existence!

The bad thing about the ambitious Hector-the-Inspector is that you probably will never see him but he writes up a ticket on your house -- sometimes condemning it -- which results in a new hassle with the Seller AFTER he has agreed to sell at a specific price. The citation could hold up the CLOSING, often resulting in an Agreement and the withholding of some of the Seller's money until the problem is corrected. An unnecessary trauma for both parties!

Obviously, if an Inspection is going to be done, YOU SHOULD NOT AGREE TO ANYTHING UNTIL IT IS COMPLETED! Only after the Inspection report is reviewed by the Buyer and Seller do they really know the attitude of each other. The key question is: does the Buyer recognise that this is an AS IS sale or does he think he can negotiate to have everything in the property renewed and replaced! In states like North Carolina which is a SELLER BEWARE STATE, the Real Estate Association forms used are so pro-Buyer that the Seller is consistently disrespected as a party to the sale of his/her own property! I personally regard such practices as violating the Constitutional Rights of the Seller! This problem I describe is especially acute when the Seller no longer lives in the home that is For Sale!

WHO HAS PERMITTED THESE PROBLEMS TO GROW?

You the person that buys the two services described above! When you have trouble with a claim. File a citation against the company at the local Better Business Bureau, send letter to the Attorney General's Office of your state. Also, if it involves an Inspector, contact the state agency that Certifies such people and report them for incompetence and negligence. Finally, keep in mind that you always have the last option of bringing a lawsuit against those who have served you badly and caused you economic damage, not to mention other forms of stress and discomfort! These last remedies are usually never tried where damages are small. In many states like North Carolina, you will have great difficulty in suing anyone because the lawyers are all playing footsy with all the Realtors and business people who are usually their main source of Bread and Butter!

JayQ

June 22, 2007