Austin Property Management Blog

Should I Get a Home Warranty for My Austin Rental Property?

Grant Williams - Monday, January 4, 2021

Having been in property management for over 10 years, Stone Oak Property Management has worked with our fair share of vendors in different industries. One industry our owners are always checking to make sure we work with are home warranty companies. As a leading Austin property management company, Stone Oak advises our current and potential clientele to leave the home warranty policy behind. While a home warranty policy can seem attractive on paper, typically they just add another layer of work on top of any issues with your rental property. 

Typically a Home Warranty is “gifted” to our property owners during the purchase of a rental property to enhance the perceived value of the property “deal“. Other times they are purchased by the home buyer/owner that may be afraid of an avalanche of maintenance costs. In both cases, the perception of value is far greater than what will typically ever be realized.  Not only will the value prove to be less than was hoped for, the aftermath of trying to utilize it can cost you in a number of untold ways.

In every case, the first action the Home Warranty company will do, when contacted by your property management company, is seek to deny your claim.  If they cannot disallow the claim through the fine details of the contract, they will arrange for a vendor to go to diagnose the issue, and further try to disallow the claim using terms like negligence, life expectancy, improper maintenance, etc.  Regardless of what they determine, you will be charged a fee for their trip.  Typically that is around 75 dollars, whether they do anything or not.

The two major items that they can on occasion help offset the replacement costs on are the water heater and HVAC system.  Assuming you had a property inspection at the time of purchase, you likely know approximately how old your water heater is, and if it is approaching 8 plus years in age this could become a consideration, though a typical complete replacement of a standard residential water heater is around 1200 dollars - or roughly two years premiums for Home Warranty coverage.  So let's say you keep the money in your reserves that you would have paid the Home Warranty Company instead, if the water heater lasts just three more years, you are way ahead financially.

If the diagnosis requires a repair or replacement of a water heater they usually find a way to stick the homeowner with the bulk of the cost.  They always say the unit must be brought up to code and will give a price higher than our cost of replacing the unit.  The warranty will not replace the unit unless the additional money is spent to bring it up to code, and they will not send other vendors to bid the job nor will they allow ours to do so.  This is just one example of how they increase your cost and provide the bare minimum. 

So that leaves us with the Air Conditioner.  This is where they scare you and sell you., and this is the area that will cause you the greatest discontent, extreme upset, and disloyalty from your residents.

In the hot summers of Austin, every HVAC breakdown is critical, and rapid response is crucial in maintaining strong resident appreciation and ultimately retention.  Home Warranty companies DO NOT accept after-hours calls, and the vendors do not do after-hours work even if the call was received during business hours.  It is not uncommon to get a call from a resident on a Friday afternoon that cannot even be assigned a vendor until Monday morning when dealing with home warranty companies.  When a claim is made it is put in the queue of vendors that often means they will not get an actual visit to the property for at least 3-5 days.  So in this scenario, we could have a resident go well over a week with no air conditioning in order to access home warranty benefits.  Sometimes if it is something simple they are able to do a quick repair and the home warranty serves its purpose, but most of the time what we see is that the vendor has to report back with a diagnosis and seek approval from the home warranty company.   This can lengthen the process and then if the home warranty approves the work they have to order parts and/or schedule a follow-up visit that further delays the repair all the while the tenant is without AC.

In addition to that delay, which is not the exception, rather the norm, there are other problems that come from warranty contractors.  The people that are sent to do the work are not vetted by us and we have no control over the customer experience with your resident. They are paid flat, predetermined amounts for work that is usually under market rates thus they may cut corners or do otherwise shoddy work. 

Financially, we have to consider the reality of what they are selling as well.  These contracts typically range from $450-$850 depending on the company, coverage, etc.  The reality is that they would go out of business pretty quickly if they were paying for $1200 water heaters or $5000 HVAC replacements on a regular basis. 

These are only a few points that come from our experience with dozens of home warranties, of which most are overall terrible while others are ok to work with even though we end up with similar results.  Some other points that contribute to our assessment without getting into the details are long delays in getting vendors to the property including some that go on for weeks, vendors failing to show up or respond, long wait times to get someone on the phone to file or follow up on claims, and no urgency when an actual emergency repair is required to protect your asset. 

In summary, understand what you may be purchasing.  In our opinion, it all but guarantees your residents dissatisfaction when living in your Austin rental home and having maintenance issues. Tenants will definitely remember these things when it is time to renew and it's in our client's best interest to keep rent-paying tenants in their properties!

Have questions about your rental property and the different protections you can offer it? Contact our team of Austin property managers today to learn more about our company & services!


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Stone Oak Property Management
13497 N Highway 183, Ste. 700
Austin, TX 78750

Phone: 512.617.6766
New Accounts: 512.615.7737
Toll Free: 888.892.7940
Fax: 512.994.2300

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