Home Warranty Solution Protects Property Buyers and Sellers from Financial Implications of Defects

Sweaty palms, anxious, nauseous, can’t sleep?  If you’ve ever bought a house, likely to be your biggest financial obligation ever, you might recognise the sudden onset of the heeby-jeebies as buyer’s remorse.  It’s that uncomfortable, pit-of-your-stomach crawling sensation when you start to worry whether you acted too impulsively, and whether the creaking eaves and rising damp should have sent you running for the hills, rather than brushing it all off like an impetuous child because “you just had to have it”.

Every year thousands of homes are traded between buyers and sellers without any guarantee that such property is free of defects. The defect could be a hidden flaw, weakness or imperfection that a seller knows about, but the buyer cannot discover through reasonable inspection.  Such defects can cost a small fortune to fix, not to mention an incredibly expensive and frustrating legal process if there’s any reasonable doubt that the seller did not fully disclose known defects.

Hollard’s Home Warranty solution is a South African first that addresses these challenges.  It provides the buyer with the absolute peace of mind and security that comes with a warranty backed by a professional property inspection, makes the property for sale instantly more marketable for the seller, and sends any possibility of buyer’s remorse packing.

Following international trends where no property sale proceeds without a professional property inspection, the Home Warranty goes one step further and couples this to an insurance policy, protecting the buyer against the financial ramifications of any defects that may emerge in the property for two years after taking transfer.

“Buying a property is highly stressful as there is an inherent trust deficit between buyers, sellers and agents. Typically, buyers worry that there may be something lurking unseen that the seller isn’t disclosing. The seller believes he or she is being pushed for the lowest possible price by agent and buyer to close the deal quicker. The agent is the ham in the sandwich, having to act in the best interests of both buyer and seller and remain objective. The Hollard Home Warranty creates a level playing field of transparency and fairness for all parties and removes many of the doubts or basis for mistrust,” explains Lee-Ann Dobrescu, Head of Group Business Development at Hollard.

Key Benefits of the Hollard Home Warranty:

• - Covers against defects with the roof and wall design, structure or workmanship.
• - Covers against defects with the foundation design, structure or workmanship.
• - Covers against faulty electrics, plumbing, drainage, sewerage and gas.
• - Covers against water irrigation or waste management systems. 

Home warranty protects buyer, seller and agent

It’s easy to assume that the Hollard Home Warranty is only about protecting buyers, but the reality is that it has been designed to protect and benefit the three key role players in a property transaction – sellers, buyers and agents.

For sellers:

• - There are many prospective buyers on the market, but the truth is that there is a real shortage of qualified buyers who can secure the necessary finance. Attaching a home warranty mark to your home makes it instantly more marketable and appealing to buyers.  It shouts, “trust me!”
• - It means your home has been passed with a clean bill of health from an independent and professional inspector, bridging the inherent trust deficit that exists in a property sale. This speeds up the selling process.
• - It makes the process fairer, and more transparent for both buyer and seller – an independent, impartial party does the home inspection. This means the agent can also act with absolute impartiality for both sides.
• - It can mean getting a higher price for your property. The buyer knows that they don’t need to worry about any unexpected additional costs or the need to build in any buffers for “what ifs?” making the sale that much more appealing and less likely to be negotiated down.
• - You will know of any excluded or minor repairs that need attention on your property, and what the cost is to do so. You can choose to do the repairs beforehand and ensure maximum sale price for your property. But if you prefer to sell as is, you won’t end up overcompensating by bringing your price down further than what the cost of the repairs would be.
• - It protects sellers against the potential financial and legal comebacks related to property defects. 

For buyers:

• - Buying a house is the largest and most stressful financial transaction you’ll make.  In fact, research shows that most defaults on home loans occur within the first 18 months from when the loan is taken, because this is likely to be the time you’re most financially stretched.  With a home warranty, you have the guaranteed peace of mind knowing that you can go into the deal with all your bases and interests covered.
• - A Home Warranty protects your financial interests, which are almost always stretched to the max when buying with deposits, bond and transfer costs, municipal deposits, moving costs and so on.  Banks apply strict lending criteria, usually requiring first-time buyers to provide between 10%-20% of the purchase price as deposit on the transaction.  If you’re footing R200k as a deposit on a R1million home along with all the other costs, the last thing you need is unplanned bills to fix hidden defects. With a home warranty, you know that you won’t have to build in any buffers for unexpected problems hiding in the woodwork. 
• - It can also mean that if you do find your dream home albeit with a few minor problems, you won’t end up walking away from a great deal because you overestimate the extent of and cost to fix minor problems. A home warranty will provide a professional inspection report that lists any exclusions or defects, so you know what you are dealing with when it comes to negotiation time. 

For agents:

• - A home warranty makes a property significantly more marketable and speeds up the sale process.
• - It protects sellers and agents against potential comebacks related to property defects and the related protracted legal process that could ensue if a buyer believes seller or agent concealed material facts about any property defects.
• - It helps sellers get a fair price for their property and provides peace of mind for all concerned parties.
• - It ensures that agents do not spend time, energy and money trying to sell a house that is later discovered to be fraught with defects. 

Debunking the voetstoots myth

A recent ruling in the Western Cape High Court put the spotlight on the term ‘voetstoots’ which many sellers believes protects them in a sale contract. The ruling relates to an almost five-year-old case dating back to March 2011, highlighting just how drawn out the legal process can be, during which time the buyer still has to live with the defects or costs of repairs.  The case to be decided on included whether serious defects that the buyer had uncovered at the house after the sale went through were indeed defects, or whether these had been concealed, and whether the voetstoots clause protected the seller.  The court found in favour of the buyer, noting that voetstoots does not protect a seller where they have misled or concealed latent defects in a property from the buyer - Voetstoots still demands full disclosure of all known defects.  With a Home Warranty, any voetstoots risk is removed as defects are established upfront, listed and if necessary excluded from cover under the warranty.

How do I get a Home Warranty?

The Hollard Home Warranty is available directly from Hollard, or it can be requested via your estate agent.  The policy is unique in that the cost can be included in the sale price of the property.  The seller can include the cover as a feature in the sale, or the buyer may insist upon the warranty as a condition of the sale. In both cases, payment for the warranty forms part of the offer to purchase. A premium is determined based on the actual selling price of the home and then deducted from the sale price and paid by the seller to the insurer in the event of a successful sale, in much the same way as estate agency commissions and other costs are settled.

What does it cost?

Premiums are determined on an individual basis, but typically you can expect to pay around R12 000 for a warranty on a R1million home, R17 400 for a R2million home and R27 500 for a R5million home. 

Peace of mind comes standard with a home warranty

“When it comes to property transactions, it’s the best solution for making sure the homework is done by experts who know what to look for. This allows risks to be identified and assessed, and for those that are not found there is also the ability to transfer the risk to an insurer. Then you can go ahead and enjoy turning your house into your family’s dream home without any buyer’s remorse or nasty surprises to spoil the journey. It’s a product that should be attached to the ‘for sale’ sign of every well-maintained home for peace of mind and the best possible outcomes for all parties concerned,” concludes Lee-Ann.