Why Home Warranty Reviews Hide the Truth

When you buy a house you've got to collect tons of information and more importantly, get your finances under control. You're swamped with too much information that most homeowners don't understand, like the home inspection report. So there's really little time to estimate repair and ongoing home maintenance costs. That's why so many homeowners read a few home warranty reviews and sign up for what promises to be a great solution.

Ready to learn the truth about home warranty reviews and the companies they serve? And if you don't know me yet, you'll find that ConsumerReports.org also write Why you should avoid home warranty choices.

1. Websites sharing home warranty reviews are selling home warranty companies and earning a sales commission.
2. Home warranty reviews are like “Cliff notes” summarizing the highlights of home warranty company websites.
3. Home warranty reviews don't (because they can't) explain how the cost of a home warranty is offset by savings.

What Home Warranty Reviews are Trying to Accomplish

You probably don't realize that most review websites want you to click on their links as that's how they make their money. It's one of the dirty secrets about how the web works. Brands pay a commission to websites that send them customers but most people don't understand this yet. You can read my disclosure policy, as there are strict FTC rules for informing website visitors.

So here's my review of three random websites with home warranty reviews. If you read the reviews, you'll see that they're selling the highlights of each company. Most often this is based on a review of the company's website, although larger review sites have done more research but only one of these three websites with home warranty reviews includes real homeowner input.

• Top10HomeWarrantyReviews.com – is a professional looking site with almost no content. For each home warranty company listed, there's a one page overview gleaned from the home warranty company website … written by a freelance writer.
  • Do they explain how they score/rank home warranty companies? They emphasize and describe how they verify consumer but there's no explanation of what criteria is used reviews navigation bar on the home page reads “How we score” but there's no link there, nor could I find this information anywhere on the website.
  • Do they explain where their customer reviews come from and how they verify their accuracy? No explanation nor can you submit a review which I wanted to do, to test how they handle negative reviews.
  • Do they disclose their affiliation with home warranty companies in the proper location (before the links)? The navigation bar on the home page says “Advertiser Disclosure” but there's no link. At the bottom of each page visited, they do state “Disclaimer: We work hard to offer you valuable and reliable information about all of the products and servivces we review. In order to provide you with this free service, we use links on our site that provide us with commissions for referring you to the seller's site. We guarantee that this does not influence the material we present, but may influence the positioning on our site, and only supports our efforts to offer you the best and most relevant information possible.”
• ConsumerAffairs.com – the name is misleading as many will confuse it with ConsumerReports or a goavernment entity. They claim they are a consumer news and advocacy organization. In reality, they give you an opportunity to review a company in exchange for your name and email. They're really a marketing company and you start getting a daily promotional email like this one on mattresses.
  • Do they explain how they score/rank home warranty companies? There's no easy way to find explanation of how their star ratings are determined, other than recent reviews having more weight and only verified reviews counted. Feels like it's automated and any company who wants to game the system can do so by getting happy customers to submit reviews.
  • From analyzing home builders on this website, it's clear that the only companies listed and reviewed are ones that pay for this visibility.
    Do they explain where their customer reviews come from and how they verify their accuracy? Reviews are submitted on their website after you create an account. More interesting was my review of their “Top 10 Best Rated Home Builders & Developers” as I know this industry. Only one in their list, KB Home, made the top 10 according to ProBuilder.com (I've written for their sister publication, ProRemodeler.com). The only other builder on their list, Dan Ryan Builders, was #45 in 2015.
  • Do they disclose their affiliation with home warranty companies in the proper location (before the links)? The only place on this website where advertising is mentioned is at the bottom of the page. Even here, it's hard for homeowners to understand what is behind their statement that “Advertisements on this site are placed and controlled by outside advertising networks. ConsumerAffairs.com does not evaluate or endorse the products and services advertised. See the FAQ for more information.” When you follow the link to the FAQ page, you learn:
    • Question “Do companies pay you to recommend their products or services?
    • Answer “No. But companies pay us to become an Accredited Member (see below). We also receive compensation (sometimes from the company; sometimes from third party agencies), when we refer a consumer to a company’s site through a link on our site, although this does not affect our ratings or reviews.” … and further down the page:
    • Question “How do you calculate star ratings?”
    • Answer “A company’s “star rating” is calculated using all ratings submitted by actual consumers. We give more weight to recent ratings, and we do not include ratings from reviews that are “spam” or fake. As a paid service, we help companies that are accredited members collect ratings and reviews from consumers. We do not write or create reviews, however, and we never change a rating at a company’s request. If an accredited member disputes the accuracy of a review, depending on the outcome of the dispute, we may not include the consumer’s rating in the company’s overall average.”

• Reviews.com – this review site is unbelieveable. There's a single article claiming 280 hours of research but nothing to support their statements. Instead of home warranty reviews for each company, they're making recommendations with a wave of their magic wand? They claim that they spent 180 hours and “… surveyed realtors and general contractors, compiled a list of more than 60 providers, evaluated the coverage options of every one of their plans, went through the quote process of more than 20 of our top contenders, spent 5 hours on the phone with sales reps, and read a whole lot of fine print.”
  • Most disheartening here is Reviews.com failed to look at the customer experience getting repairs, and that's the reason you get a home warranty. These companies are marketing engines that sell, sell, sell. My first-hand experience is that once they have your money, they dispatch a contractor and you're on your own!
    Do they explain how they score/rank home warranty companies? They explain the process they went through to filter out home warranty companies because:
    • 13 companies disqualified because they don't offer comprehensive coverage (appliances and whole house systems).
    • 33 companies dropped because they aren't available nationwide.
    • 10 companies dropped because they're business model uses regional affiliates to feed larger companies. With home warranties this is a problem because you need the business owner (contract) to be accountable.
    • 5 more disqualified based on the weighted score including coverage options, quote process and public opinion.
  • Do they explain where their customer reviews come from and how they verify their accuracy? There are no customer reviews on their website.
  • Do they disclose their affiliation with home warranty companies in the proper location (before the links)? At the very bottom of the page (14 pages if printed), we find the “Advertiser Disclosure: Reviews.com has an advertising relationship with some of the offers included on this page. However, the rankings and listings of our reviews, tools and all other content are based on objective analysis. For more information and a complete list of our advertising partners, please check out our full Advertiser Disclosure. Reviews.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products are presented without warranty.”

Home Warranty Reviews & Return on Investment

Homeowners get a home warranty for piece of mind. They often assume they'll save money, and precious time that they won't have to spend taking care of their home. This couldn't be further from the truth for the following reasons:

• Preventive maintenance – which aren't covered by home warranties, is the best approach to fewer home repairs, efficient operations and extending the life of your home systems and appliances.
• Minor repairs – which are covered by a home warranty, focus on fixing the immediate problem but not the source of the problem. For example, the band-aid repair to my heat pump was adding “2 pounds” of freon. They ignored me when I challenged them to find and fix the cause of the leak. It took another 6 weeks (20+ phone calles and emails) to get repairs authorized using estimates I got and submitted.
• Replacement appliances and systems – are done as a last resort and you have little control over what you get. After living in our new home for three months without heat, they installed a Goodman condenser attached to a Trane air handler, and it failed 15 months later. In a previous home, after 5 or 6 service calls for the waterfall in our freezer, we were authorized to buy a replacement refrigerator but had to buy it at SEARs.

When you buy a house, refrigerator or a car, you compare prices. You need to apply the same math when considering a home warranty. It's a little more challenging but the time is well spent as it will guide you in managing your home for years to come. Take inventory of your home's appliance and systems like the hot water heater, heating and air conditioning systems. Estimate the age of each item and how many years before you'll need to replace each (read Budgeting for Exterior Home Updates and Interior Home Components).

So it's important when researching information, that you take out pen and paper. This video from the National Home Service Contract Association representing home warranty companies, gives you a lot of the pricing information you need. But you've got to see through their misleading conclusions that you're going to save a lot of money with a home warranty. Theyexplain that HVAC systems have a projected lifetime of 10 to 15 years, and cost $4,000 to $6,000 to replace. Their math says a $500 home warranty contract plus one service call for $75 is less than the cost to replace your HVAC (2 minutes, 42 seconds in video below).

Why then would a home warranty company sell me a policy for under $1,000/yr when my house is twenty years old, and so are the two heat pumps. The math I didn't do before buying the house, probably because the seller paid the first year of the home warranty?

Replacement of HVAC heat pumps, $4,000 to $8,000 x 2 = $8,000 to $16,000

Home warranty contract $900 x 2 yrs = $1,800 plus $180 (3 service calls) = $1,980

This math confirms that the home warranty company doesn't expect to pay for a new heat pump. That matches my experience where they first rigged a partial replacement that failed after 15 months. Then used numerous delay tactics (details here, Can You Trust a Home Warranty?) like claiming a second opinion was needed, so I eventually found a trustworthy HVAC company and had a new heat pump installed about a month living with temperatures hovering around 95° in my house (over 110° outside).

What will I do differently next time as it's obvious home warranty reviews won't disclose this information. For houses older than 10 years, I will get an HVAC inspection on top of the standard home inspection. If I'd done this, I could have asked the sellers to reduce the contract price to cover the replacement cost of one or both heat pumps. My mistake but this is house #15 and I've never had to replace a failing HVAC system.