Home Warranty Plans: How To Lose A Good Tenant

Is Losing A Good Resident Worth It?

Let me share with you a real-life situation that happened at Management One.

First call to our office:

It all started on April 26, 2019, the Resident called in a repair for the Air Conditioning unit. This property has a Home Warranty, so we issued a work order to them. As a property management company issuing a work order on behalf of the homeowner, we are not able to use their online portal, and we must call in the work order. Our property inspector was on the phone for nearly an hour trying to get the work order issued.

While this is normal for properties with home warranties, it takes less than 5 minutes to place a work order with our vendors. 

Repair made:

A repair was made to replace the blower on the AC Unit on May 2nd, 2019, by a company that the home warranty company assigned.

Second call to our office for the AC Unit:

Fast forward to July 19, 2019, there was another issue with the AC unit, it was not cooling. Management One contacted the Home Warranty Company again. On July 23rd, 2019, a Home Warranty vendor arrived at the property and could not complete the diagnostics because the unit was frozen. A frozen AC unit is indicative of a unit that is low on freon, which was not caught during the initial visit to the property back in May 2019. Thus, the vendor rescheduled for August 9th, 2019, to return once the unit had time to defrost.

Keep in mind while all this is going on, the Resident is dealing with temperatures from 90-100 degrees.

On August 9th, the vendor arrived back at the property and completed the diagnostics. Turns out the unit was low on Freon. The vendor informed the Resident since it's freon there are two options: either pay the $150 for Freon from their pocket now or wait for the Home Warranty vendor to receive payment from the owner directly, then they would reschedule to come back and fill the unit with Freon. The Resident chose the first option as living without AC in mid-August is miserable in Southern California.

Third call to our office for the AC unit:

May 4th, 2020 (a full year later), the AC unit was not cooling again. Management One contacted the home warranty company to issue a repair request.

They would not let us issue a work order because there was no Credit Card information on file at the Home Warranty company for the owner, the policyholder. We had to contact the owner, who then had to contact the Home Warranty company and get the information on file.

Before the Resident contacted our office on May 4th, she hired a third-party vendor to come and look at the unit out of sheer frustration. The third-party vendor discovered the unit to be low on freon and to have a leak.

On May 11th, 2020, a Home Warranty vendor visited the property, completed a "repair." However, upon further investigation, we came to realize that, in fact, the repairs were not made.

On May 13th, 2020, our Property Inspector contacted the Home Warranty vendor directly, and they didn't have appointments to go back for another week. This, of course, is not acceptable, we then contacted the Home Warranty company and requested a new company be sent out.

We were able to get a new company out there on May 21st, nearly 16 days after the Resident contacted our office for the third time. The vendor found the unit to be 2 pounds low on freon, costing $225. We reached the owner with the vendor on the line and attempted to get approval. The owner was not available; therefore, we couldn't proceed. Later that afternoon, as a result of the situation and out of sheer frustration, the Resident submitted a notice to vacate.

Think about that for a minute; the Resident is so upset that they are willing to incur the cost of moving just not to have to deal with this issue any longer. As of May 28th, the repair is still not completed. Additionally, the homeowner is so frustrated with the Home Warranty company for dragging this out for over a year that he gave Management One the approval to send out one of our vendors.

Cost Breakdown, Is A Home Warranty Worth It?

The short answer is NO, and the long answer is NO. A home warranty is great for a homeowner on their personal property, but for a landlord and Resident, the home warranty becomes more of a hindrance. As a homeowner, you can pay for the service call fee at the time you request the work. As a property management company calling on behalf of a homeowner, we required to remit payment before the work order can be issued. This payment can be rendered by charging the owner's credit card on file with the Home Warranty company or sending in a check. As it relates back to our story, we had to contact the homeowner for his credit card information, thus causing a delay. As a homeowner, you can also decide to pay any extra costs at the time of the service call for the repair to be completed. Such as paying for Freon. Residents can not make these decisions on the spot; thus, the work can not be completed in one visit, resulting in additional appointments and time off from work for the residents.

Can we say HEADACHE?

In this case, it has cost the owner a good resident paying nearly $2000 a month in rent. This owner is faced with still having to replace the unit for $2500 and rehabbing the property, which on average, runs about $3900. The property was vacant for two months while rehabbing and renting the property.

So this one item is going to cost this owner approximately $8,000 when it's all said and done. Was it worth it? Clearly not.

Cut The Red Tape...

At the end of the day, a Home Warranty plan on a rental property is not a great idea from the amount of work that it takes to get items repaired to the overall frustration to the Resident and homeowner. Worse case, as in this case, the Resident is so frustrated that they are going to vacate the property.

At Management One, we have a maximum of $250 for repairs, meaning if a repair is $250 or less, we can approve on your behalf. If you recall both times, the Freon needed to fix the unit was less than the $250 ($150 the first time and $225 the second time). If Management One's vendor were dispatched, they would have been able to complete the repair on the spot and not required the owner to be involved or the Resident to take additional time off from work, or give notice to vacate the property.

Studies show that 83% of Resident turnover is controllable, and of that 83%, 60% relates to maintenance and repairs not be completed timely or at all. Because of this, we require our vendors to contact a resident within 4 hours of receiving a work order, and they must schedule the repair within 48-business hours. We have a partnership in place between yourself, the Resident, our Vendors, and ourselves, to always work together quickly and effectively to provide the highest level of service, giving residents no reason to want to move.

For a list of the Common Repairs on a Rental Property check out this great article:

Meanwhile, are you considering Renting to Tenants with Pets? What are the Pros and Cons? You can find out here.