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Is it worth purchasing a home warranty when buying a newer (15 yo) condo/townhome? We are planning on replacing the kitchen appliances ASAP, the hot water heater and central air are only a few years old, and the furnace will probably need to be replaced in the next 2-5 years. I'm not even sure what a home warranty would cover?

I recommend you check with your real estate agent to find out what home warranties are available and at what cost. I also recommend you telephone whoever provides your current homeowners or renters insurance to see if they offer a home warranty and at what price.

I would expect a home warranty to cover your townhome would run in the neighborhood of $500 per year with a $100 deductible. It probably will cover major mechanical and structural systems, and it might cover major appliances (washer, dryer, refrigerator, etc.)

If you can afford to replace the HVAC (heating, ventilation, and cooling) system or the roof if they fail unexpectedly, or replace a major appliance if it fails, then you probably would prefer to use the warranty premium to make the upgrades and repairs you described. On the other hand, if unexpected repairs would devastate your finances, then the warranty premium may buy you the peace of mind to allow you to sleep at night.

Personally, I would hire a good house inspector before I purchased residential real estate, and I would use the inspector's report to adjust my offer to include the cost of needed upgrades and neglected maintenance. In my neck of the woods, some house inspectors offer home warranties on houses that pass their inspection for a substantially reduced premium. However, I understand this practice is not typical across the country.

David Jacobs
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