Guiding consumers since 2009

The importance of a home warranty

By Danielle van Wyk

Hollard claims its new home warranty product gives ‘absolute peace of mind and security that comes with a warranty backed by a professional property inspection, makes the property for sale instantly more marketable for the seller, and sends any possibility of buyer’s remorse packing. ‘

Cottoning on to the international trend where no property is sold without a formal property inspection, this product goes a step further and couples this to an insurance policy. This policy in turn protects the buyer against financial complications that could arise in the presence of any defects that may emerge in the first two years of the sale.

“Buying a property is highly stressful as there is an inherent trust deficit between buyers, sellers and agents. Typically, buyers worry that there may be something lurking unseen that the seller isn’t disclosing.  The seller believes he or she is being pushed for the lowest possible price by agent and buyer to close the deal quicker.  The agent is the ham in the sandwich, having to act in the best interests of both buyer and seller and remain objective.  The Hollard Home Warranty creates a level playing field of transparency and fairness for all parties and removes many of the doubts or basis for mistrust,” explained Lee-Ann Dobrescu, head of group business development at Hollard..

Costing structure

“Premiums are determined on an individual basis, but typically you can expect to pay around R12 000 for a warranty on a R1million home, R17 400 for a R2million home and R27 500 for a R5million home,” Dobrescu noted.

The warranty is available directly from Hollard, or it can be requested via your estate agent. 

It is a unique policy, in that the cost can be included in the sale.

The seller can choose to do this by including ‘the cover as a feature in the sale, or the buyer may insist upon the warranty as a condition of the sale. In both cases, payment for the warranty forms part of the offer to purchase.’

A premium is then determined based on the actual selling price of the property and in turn deducted from the asking/sale price. This money is then paid by the seller to the insurer.

Getting the right protection

While the warranty is a huge upfront expense, Hollard points out that buyers just need to get used to the idea of getting a warranty for a home. Simply put, would you buy a car without a warranty in the event of unexpected defects or breakdowns? Furthermore would you take the salespersons word that the car is in fact in pristine condition without any checks being done?

“The truth is that South Africans are more diligent in ensuring that their vehicle purchase does not deliver any nasty surprises than they are their home. This is surprising given that the financial quantum is much higher and the risks far greater.

Every year thousands of homes are traded between buyers and sellers without any guarantee that such property is free of defects. The defect could be a hidden flaw, weakness or imperfection that a seller knows about, but the buyer cannot discover through reasonable inspection.  Such defects can cost a small fortune to fix, not to mention an incredibly expensive and frustrating legal process if there’s any reasonable doubt that the seller did not fully disclose known defects,” Dobrescu said.

Sellers

While there is no shortage of buyers on the market, there is however a shortage of buyers who are able to secure the necessary finance. Attaching a home warranty to your home, makes it more marketable instantaneously.

This would mean that your home has passed the inspection by Hollards chosen home inspectors, encouraging trust that so often is lacking in a sale. This inevitably speeds up the process.

“It makes the process fairer, and more transparent for both buyer and seller – an independent, impartial party does the home inspection.  This means the agent can also act with absolute impartiality for both sides,” advises Dobrescu.

Another benefit is that it could see you getting a higher price for your property. The buyer knows that they don’t need to worry about any added costs, and therefore the home becomes more appealing and less likely to be ‘negotiated down.’

It will also alert you as to any faults or areas of attention on the property, and what the cost would be to fix them. This provides you with an opportunity to do so before the sale and maybe ensure a better price.

“It protects sellers against the potential financial and legal comebacks related to property defects,” Dobrescu highlighted.

Buyers

For people on this end, the process can prove to be a stressful one.

“In fact, research shows that most defaults on home loans occur within the first 18 months from when the loan is taken, because this is likely to be the time you’re most financially stretched.  With a home warranty, you have the guaranteed peace of mind knowing that you can go into the deal with all your bases and interests covered,” said Dobrescu.

The home warranty does well to protect your financial interests, which usually are stretched to capacity with such a transaction and decision. The warranty also gives you the added benefit of not having to foot any ‘built in buffers for unforeseen issues hiding in the woodwork’, so to speak.

“A home warranty will provide a professional inspection report that lists any exclusions or defects, so you know what you are dealing with when it comes to negotiation time,” stated Dobrescu.

Agents

The warranty is a huge help for agents as it makes the property more marketable and speeds up the potentially lengthy process.

It also protects agents against potential comebacks at the hands of ‘property defects and the related protracted legal process that could ensue if a buyer believes seller or agent concealed material facts about any property defects,’’ outlined Dobrescu.

 “When it comes to property transactions, it’s the best solution for making sure the homework is done by experts who know what to look for. This allows risks to be identified and assessed, and for those that are not found there is also the ability to transfer the risk to an insurer. 

“Then you can go ahead and enjoy turning your house into your family’s dream home without any buyer’s remorse or nasty surprises to spoil the journey.  It’s a product that should be attached to the ‘for sale’ sign of every well-maintained home for peace of mind and the best possible outcomes for all parties concerned,” said Dobrescu.

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