Home Warranty Coverage Questions

**Nathan Thornberry** · 05-14-2012, 08:12 AM

Hey All-

In addition to 90-Day Warranties for inspectors, we run a one-year warranty company...as in those policies the agents push at closing and the ones that result in repairs (or denied claims) after your inspection.

I AM NOT soliciting one year warranty referrals from inspectors- I think it's not a great position to put you in at all. I've had several inspectors inquire about doing so, some even wanting a fee, but I see it as a potential to lose you a referring agent and I don't want to see that happen.

What I am looking for is to answer any coverage questions or address any specific issues you've run into on warranty claims from any provider. It's my specialty, I write these policies for a living and interpret coverage, so let me know if you have anything and I'll respond to this thread! I've been impressed with inspectors' knowledge on this site regarding the home warranties/service contracts thus far and want to take that even further.

Similar Threads:

**Dan Harris** · 05-14-2012, 09:17 AM

Nathan, is your company Lic to provide these warranties in AZ ?

**Nathan Thornberry** · 05-14-2012, 09:57 AM

We offer 90-Day Warranties throughout the U.S. and Canada, however we are not yet offering one year warranties in Arizona. The Arizona standards aren't tough, we're definitely qualified, just not there yet from a standpoint of expanding sales staff and our contractor network. We just got done with South Carolina and we're probably going to do Georgia next- but Soon!

That being said, I am quite familiar with their regulations and the policies being offered there so if you have a coverage question in Arizona or any other state for that matter, I can probably give you an answer in moments.

william siegel · 05-15-2012, 12:19 PM

Ditto that question for Florida

**Nathan Thornberry** · 05-15-2012, 01:30 PM

Ditto that answer for Florida. There was another 90-Day Warranty company in Florida at one point in time, they were actually issued a cease and desist there and in Wisconsin as well I believe, and for good reason- we conduct our business in a fully compliant manner, and I will personally address individual state concerns personally with any inspector.

Really, this thread was started to answer questions regarding one year warranties in general, and more specifically coverage issues that come back to the inspection in one way or another.

But I'm happy to go on and on about my products if you really want me to! I'd rather not though...kind of lame.

**Ken Rowe** · 06-26-2012, 11:16 PM

As a past area manager for a nationwide home inspection and home warranty company I have first hand knowledge of one year warranties and coverage issues for the inspectors.

1) If you want to loose real estate referrals, offer home warranties. Even though the RESPA rules do not allow warranty companies to pay RE agents, they still do. And if you try to cut off the RE agents commission you'll be out the referral.

2) If there is a claim, it's common practice for the warranty company to automatically deny the claim, even if it's legit. When that happens, expect a phone call from the pissed off client. Warranty companies cannot make money if they're paying claims.

3) Some warranty companies require a copy of the inspection report. And / or the inspector to file a separate report addressing only covered items. They don't want to cover pre-existing conditions. When a claim is filed, but your report indicates no problems during the inspection 8 months ago, expect a phone call from the warranty company demanding you change your report. When you refuse to do so, expect them to change your report themselves. Again, they can't make money if they're paying claims.

4) If you're selling home warranties, read the ultra-fine print. They really don't cover anything. For example, shingled roof coverage does not include penetrations through the roof or flashings. They don't include coverage for acts of nature, improper installation or excessive age. What's left to leak?

**Nathan Thornberry** · 06-27-2012, 05:34 AM

Originally Posted by Ken Rowe

As a past area manager for a nationwide home inspection and home warranty company I have first hand knowledge of one year warranties and coverage issues for the inspectors.

1) If you want to loose real estate referrals, offer home warranties. Even though the RESPA rules do not allow warranty companies to pay RE agents, they still do. And if you try to cut off the RE agents commission you'll be out the referral.

2) If there is a claim, it's common practice for the warranty company to automatically deny the claim, even if it's legit. When that happens, expect a phone call from the pissed off client. Warranty companies cannot make money if they're paying claims.

3) Some warranty companies require a copy of the inspection report. And / or the inspector to file a separate report addressing only covered items. They don't want to cover pre-existing conditions. When a claim is filed, but your report indicates no problems during the inspection 8 months ago, expect a phone call from the warranty company demanding you change your report. When you refuse to do so, expect them to change your report themselves. Again, they can't make money if they're paying claims.

4) If you're selling home warranties, read the ultra-fine print. They really don't cover anything. For example, shingled roof coverage does not include penetrations through the roof or flashings. They don't include coverage for acts of nature, improper installation or excessive age. What's left to leak?

Please name names. Who did you work for? Those are horrifically bad policies and I think everyone deserves to know.

As for my home warranty company, we do nothing like this and I invite you to hang around our office for a day and see what a real warranty company operates like.

On a separate note, you are wrong on the RESPA issue. Look up the HUD interpretive ruling on administrative fees- it specifies how fees can be paid to agents and for what reasons. It's part of the federal register, HUD is responsible for enforcing RESPA provisions and I've personally spoken to a HUD investigator regarding our process for paying them to ensure we wouldn't get ourselves or our referring agents in any trouble.

Oh, and we have a policy that if it wasn't found by the home inspector, it's not a pre-existing condition. And we've never asked an inspector to change his report- these people you're referring to belong in jail.

We want names!!!

**Ken Rowe** · 06-27-2012, 09:22 AM

Nathan,

People who've been on this site long enough know whom I'm referring to and I'm not about to open that can of worms. To be fair, it wasn't just my previous employer. Previously to a buyout by that company we had contracts to perform inspections for other warranty companies...they all pulled this crap.

On a separate note, you are wrong on the RESPA issue. Look up the HUD interpretive ruling on administrative fees- it specifies how fees can be paid to agents and for what reasons.

I don't need to look up the HUD interpretive ruling, I know what it says. Basically it says fees cannot be paid to a referring agent unless that agent provides an actual service, other than filling out the warranty application. Examples would be:

conducting actual inspections of the items to be covered by the warranty to identify pre-existing conditions;
recording serial numbers of the items to be covered;
documenting the condition of the covered items by taking pictures; and/or
reporting to the home warranty company regarding inspections.

I've never seen an RE agent do any of the first three. But they will forward a copy of the inspection report to the warranty company, thus they are "providing an actual service".

Section 8 of RESPA states:

“No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real state settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.”

Is providing a copy of the inspection report to the warranty company an actual service? Not in my opinion. But as I originally stated RESPA prohibits payment to referring agents, but they do it anyways.

For you to say:

I've personally spoken to a HUD investigator regarding our process for paying them to ensure we wouldn't get ourselves or our referring agents in any trouble.

tells me that your warranty company is no different than all the others out there. Instead of having a policy of not paying referral fees to agents (as RESPA was intended) you work in the gray area paying referral fees but calling it "services actually performed".

**Nathan Thornberry** · 06-28-2012, 12:17 AM

So the official federal government issued guidelines from HUD describing specifically how to pay administrative fees in a compliant way are a gray area?

I don't know exactly how to respond, but as to the idea that warranty companies act like you described I can say that is in no way true for myself, I'm familiar with a few of my competitors that don't act that way at all, and there was a case in New York about a company that did act in similar ways to what you described and they got it big time in a suit from the state- I think what you described is completely unethical and very potentially illegal, and I would never run a business in such a way.

**Ken Rowe** · 06-28-2012, 08:23 AM

Originally Posted by Nathan Thornberry

So the official federal government issued guidelines from HUD describing specifically how to pay administrative fees in a compliant way are a gray area?

But you didn't say you follow the government issued guidelines from HUD. You said:

I've personally spoken to a HUD investigator regarding our process for paying them to ensure we wouldn't get ourselves or our referring agents in any trouble.

Which tells me you were unsure if your practices fell within the guidelines (a gray area).

In other words, if you knew your business practices were ethical and within the guidelines there would be no reason to speak with a HUD investigator regarding your process of paying referring agents.

Originally Posted by Nathan Thornberry

I don't know exactly how to respond, but as to the idea that warranty companies act like you described I can say that is in no way true for myself, I'm familiar with a few of my competitors that don't act that way at all, and there was a case in New York about a company that did act in similar ways to what you described and they got it big time in a suit from the state- I think what you described is completely unethical and very potentially illegal, and I would never run a business in such a way.

Your original post asked about any specific issues we've encountered on warranty claims from providers. I'm simply relating my experience with 4 or 5 national companies I've had dealings with over the past 10 years.