Home Warranties Boom in Real Estate Bust
Written by: Steve Cook       
 There's a silver lining in every cloud and in the real estate recession, that lining is called home warranties.
Many builders offer warranties to cover appliances, mechanical systems and construction of a new home.  A second kind, sold to buyers of existing homes, typically don't cover pre-existing conditions but for an annual fee of $250 to $600 will pay the cost of repairing the mechanical problems that regular home insurance doesn't, such as clogged pipes, HVAC breakdowns, furnace failures, and appliances that conk out.
Less than one in five homes in America is covered by a warranty, except in California, where nine out of 10 existing homes in the Golden State are sold with a one-year warranty.
 But that might be changing. Sellers trying to go the extra mile to land buyers are offering home warranties to sweeten the deal.  In 2008, 42 percent of all sellers offered incentives, including one-year warranties according to the NAR Profiles of Home Buyers and Sellers.
The home warranty business is hot.  Revenues at Home Warranty of America grew more than six percent in the first quarter and the company expects to end 2009 with double-digit growth as it did in 2008.
The foreclosure market, which represents about half of all existing homes sold today, has been a godsend for home warranties.  Standard warranties cover property "as is" and not pre-existing conditions.  However, when a house has been neglected for months during the foreclosure process and before as well, it may harbor problems that an inspection will miss.  If something was overlooked, not visible or apparent at the inspection, a home warranty might cover a repair of the defect.
 With foreclosures accounting for an ever increasing share of existing home sales, there's no end in sight to the home warranty mini-boom.