American Home Shield Home Warranty

Home warranty fees coming under scrutiny

The case involves potentially thousands of home buyers and sellers who purchased warranty coverage from American Home Shield between May 2008 and March of this year. American Home Shield is the dominant player in the home warranty field, with sales of $657 million in 2010, according to the company. Home warranty policies offer repairs and replacements for owners when specified home systems and appliances malfunction.

Attorneys representing the plaintiffs say as many as 500,000 consumers may be members of the class, though neither they nor American Home Shield would speculate on how many ultimately will file for and receive cash from the settlement.

In their suit, the plaintiffs alleged that American Home Shield violated federal law by paying kickbacks to real estate brokerage firms and agents for promoting warranty policies to their customers. The Real Estate Settlement Procedures Act prohibits payments for referrals of “settlement services” in connection with most mortgage transactions. It also bans the giving or receiving of fees or other compensation when no substantive services are rendered.

American Home Shield denied any wrongdoing in the settlement and said it sought to limit its exposure to litigation costs by resolving the dispute.

The complaint, filed by homeowners in Alabama, involved payment of a $524 fee at closing for a one-year home warranty from American Home Shield. A portion of that amount allegedly was paid to the real estate agent by American Home Shield.

Real estate professionals and consumer groups say payments such as these have been commonplace and controversial in the industry for years. Typical warranty policies cost anywhere from $400 to $500; fees to real estate brokers and agents range from $60 to $90. Warranty companies took in an estimated $1.5 billion in sales during 2009, according to Warranty Week.

Some real estate companies refuse to participate in payment plans, while others defend the practice. Glenn Kelman, chief executive of Redfin, a national online brokerage, says if his firm finds that any agent “accepts gifts or payments from any party in the transaction, we fire the agent.”

Douglas R. Miller, executive director of Consumer Advocates in American Real Estate and former head of a title insurance agency in Minnesota, calls payments to real estate brokers and agents by home warranty companies “bribes,” whether clients know about them or not.

THE VALUE OF HOME WARRANTIES « The Woodlands Real Estate Daily

Thought this article in a recent email from Real Estate Magazine might be interesting to anyone buying or selling: The Value of Home Warranties: Protect Your Wallet

, June 30, 2011—Even with home sales and prices continuing to fall nationwide, millions of Americans will still navigate the process of buying and selling homes this summer, and for many, the sheer volume of details and decisions can beoverwhelming. With so much to consider when buying or selling a home, it can be challenging to investigate even routine aspects of the process, such as the value of home warranties. Still, even with advantages to both parties, many buyers and sellers remain uninformed about the purpose and benefits of home warranties, which cover the repair or replacement of many home-system components and appliances. Home warranties—which are available for single-family homes, condominiums, townhouses, vacation homes and multi-unit properties—address key consumer needs, typically covering the cost of replacing or repairing such things as heating and air conditioning components, dishwashers, water heaters, ovens, garbage disposals, and more. While many of the home’s system components and appliances are covered as part of a standard home warranty, if home buyers wish for more household items to be covered, they should determine whether their home warranty provider offers an add-on package. American Home Shield offers plans allowing consumers to customize their home warranty to cover specific components and appliances, including ceiling fans, garage door openers, swimming pools and more. While home warranties are a popular addition to the home buying and selling process, they may be purchased at any time. Chapman encourages consumers to do their research before choosing a plan or provider, as costs, coverage levels, customer service and other factors vary. American Home Shield’s website offers homeowners an interactive experience where they can review a range of options and custom-design plans based on the cost and coverage level that is right for them.

Kiplinger's Personal Finance

Walker's manual of Western corporations

The home buyer's question and answer book

Plunkett's Real Estate and Construction Industry Almanac 2007 (eBook), Real Estate and Construction Industry Market Research, Statistics, Trends and Leading Companies

Buying a Second Home, Income, Getaway Or Retirement