Several months ago, on one of the hottest days of the summer in Las Vegas, Nevada, one of my tenants phoned to tell me that one of the air conditioning units went out in the house. 

It took me one week of arguing with American Home Shield, the home warranty company with whom I had a policy for the house, to get them to fix the problem which was covered by their policy.  My experience might be helpful to anyone else who has the same problem getting American Home Shield to respond promptly. 

The Home Warranty

What is a home warranty?  It’s an ancillary policy that you can purchase for a home, offering extended coverage on items that your normal insurance policy doesn’t cover.  While I used to get these policies to cover the forced air heater and the air conditioner (HVAC) in the home, they cover other items inside the home (such as the appliances, ceiling fans, etc) as well.  The policies usually run between $350-$900 per year depending on what you have covered.  There is typically a call out fee for each incident which ranges from $0 to $125, depending on your policy.  Most home warranty policies do not cover normal wear and tear or misuse (one real life example is a washing machine that broke because it was consistently overloaded).  

As a landlord, I would often buy a home warranty to cover the unexpected issues which may arise with my rentals (refer to my previous post on this topic:  How I Simplify Being A Landlord http://scottgordon.com/2020/08/14/how-i-simplify-being-a-landlord/).  

The Process

The process for submitting a home warranty claim is fairly straightforward.   

1. You simply call their 800 number or go online to their website.
2. Provide your policy number.
3. Tell them the item which is broken.
4. Pre-pay the call out fee, if any, with a credit or debit card. 
5. The home warranty will assign a third party service technician, based upon the problem you’re having, the location of your home, and the availability of the technician.
6. You’ll receive a confirmation email with the third party service technician’s contact information.   This confirmation email usually also includes a phone number for the home warranty company as well, allowing you to check the status of the order (which you can also do online). 
7. The third party service technician will contact you to schedule an appointment.  They usually provide a four hour time frame in which they’ll arrive. 
8. The third party service technician will evaluate the issue, determine the problem, and if the problem is covered under the home warranty. 
9. If parts are required to do the repair (for example, an air conditioner compressor), the third party service technician will contact the home warranty company to order the parts.   
10. With the proper approvals and the parts in hand, the third party service technician will schedule another appointment to repair the problem.
    
    

The Problem With The Process

In my experience, the problems with the process typically happen in steps 7 and 9 above. 

In Step 7, you may learn that the third party service technician will deprioritize service requests that originate from a home warranty company like American Home Shield.  In one recent incident, an air conditioner at one of my rentals went out at 7PM on a Sunday.  Even though I was able to contact the third party service provider (using the phone number in the confirmation email, in Step 6 above) at 9:30 PM, I was told that all home warranty requests had to wait until the following morning.   The third party service technician only took non-warranty requests after hours.  

In Step 9, you may learn that the home warranty company routes all purchasing through a central purchasing team.  In the case of the air conditioner problem, the third party service technician wouldn’t (or couldn’t) order the part directly; it had to come through the home warranty company.  Even though the part was available at the parts supplier, the third party service technician couldn’t get it without a PO number from the home warranty company.  I even offered to guarantee the purchase with a credit card, thinking that they could get the part now and if for some reason the home warranty company didn’t send the PO number that they could charge my credit card.  No dice.  I asked how much it would cost to do the work outside of the home warranty company, but the third party service provider would only offer to replace the entire air conditioner (estimated cost:  $3,000).   There is no creative way around this bottleneck; your job will not move forward without the PO number from the home warranty company.

How I Got American Home Shield To Respond 

It was late Friday afternoon, almost six days since I’d submitted the original request on the previous Sunday.  Each day that week (multiple times each day) I’d called the American Home Shield phone number provided in the confirmation email.  Each time I was routed to an overseas call center, where they answered, asked for the home address, then put me on hold for 3-5 minutes to “look up the account information”.  The result was the same each time – “I’ll put in a response to escalate, sir”. 

Asking for a supervisor didn’t produce any results.  Advising them that I was in violation of the Nevada statute (which I really wasn’t … as you’ll see below I’d already installed a temporary air conditioning window unit to replace the broken unit) which requires a landlord to fix an air conditioner within 48 hours if the temperature is above 90 or so degrees didn’t speed the process either.

The only thing that worked was this: 

1. Instead of calling the number provided in the confirmation email, I phoned the sales number on the American Home Shiled website, and spoke with a US based sales person. 
2. I plead my case, advising him that based upon their delays I was in violation of at least one Nevada statute.   I also told him that my tenant was elderly with health issues (a small but necessary fib). 
3. I reminded the sales person that I held several home warranty policies with American Home Shield, and while I didn’t blame the sales person (it wasn’t his fault, of course)  if I didn’t get a resolution immediately I would start cancelling my policies. 

It was at this point he gave me the “secret number” to reach the American Home Shield parts approval purchasing team.   He said “Dial 1-800-251-1608.  When prompted, enter #4 then #2.  You may have to wait a while, but you’ll eventually get someone who can help.  Give them this Dispatch number ” and he rattled off a long alpha numeric reference code. 

I called the number, and waited one hour and fourteen minutes on hold.  I spoke with a friendly US based American Home Shield rep, explained my situation and provider her with the dispatch number.   Within 3 minutes she had the part approved.  Problem solved!

Other Things You Can Do When Your Home Warranty Company Won’t Respond 

When I look back on this incident, there are a few other things that I could have done to make it go smoother. 

1. Maintain Mission Critical Items
   I relied on the home warranty to fix any problems that might arise at the home.  But if I’m being completely honest with myself, I should have had the HVAC inspected and maintained annually.  This might have identified the problem before it became an urgent issue, inconveniencing my tenant.  Yes, the home warranty wouldn’t have covered the maintenance nor any pre-emptive repairs, but it would have saved me hours of sitting on the phone with American Home Shield and kept my tenants from being inconvenienced, … which is worth the extra cost. 
2. Have A Backup Plan
   Having a back up plan is very important – and sometimes it only comes from experience.  I was able to rent an air conditioning window unit to keep the home cool while I was sorting out this issue.  This is now part of my emergency checklist; if a tenant has an A/C issue I can get a temporary window unit installed ASAP.  
3. Be The Squeaky Wheel
   As I reflect on the issue, being a squeaky wheel helped solve this issue.  I kept escalating until I found the answer.   I never accepted “no”.   I used every option available to motivate American Home Shield to approve the part.  

I hope that this is helpful to you.  Now more than ever it seems that home warranty companies are over indexing on sales, and under indexing on customer service and support when you have a problem.  I recently (intentionally) let the American Home Shield home warranty on one of my properties lapse.  Immediately I started to receive phone calls and emails multiple times a day from the American Home Shield sales team, reminding me that the policy had lapsed and asking if I wanted to renew.  Where were these people a few months earlier when the air conditioning in that unit went out?   It is clear where their priorities lie. 

It’s no surprise that the real estate market is challenging for investors.  With prices at a long term high, finding deals has become increasingly more difficult.  While I am in no means a formal real estate advisor nor fiduciary (consult your own experts before you make any final decisions), I did want to share where I’m currently focused in case it might provide you with inspiration. 

I’ve long been a fan of investing where others are fleeing.  But I’m also a proponent of investing in areas you know well.  If I lived in a large urban city I would be looking at acquiring rental apartments … the same ones people are fleeing to buy / rent in suburban and rural areas.   So investing in New York, Chicago, or even Los Angeles (which arguably will recover more slowly than the previous two I mentioned) isn’t a viable option. 

I also don’t think that commercial real estate is at a “rock bottom” price point sufficient to warrant my attention.  In my opinion, we have a bit further lower to go before the day comes where I’m willing to put my feet in the water.  With that said, if I saw a nice laundromat or a storage unit I might be convinced to pick it up!

But there is one area that does have some near term upside, and is just unattractive enough to a mainstream real estate investor to catch my eye:  land. 

Land is the ugly duckling of real estate investing.  But acquired at the right price point, it represents a great hedge against inflation and potentially a lucrative long term investment.  As I explained in my previous post, Camp Hacking is just one way to make money from investment land.  Of course, just as with any real estate investment, you must buy carefully.  But as commercial real estate plummets and residential real estate skyrockets, vacant land offers (in my personal opinion) a great opportunity to take advantage of future growth. 

Again, this is simply my opinion.  Your research will help guide your own opinions. 

Happy investing!

Sneak Peak: I’ve been doing a lot of thinking about when I should say “enough is enough”. When I should pivot my focus from planting to harvesting, and enjoying the fruits of my labor (and investing). As I align these thoughts to concrete ideas, I’ll share them here. In the meantime, if you have any thoughts, reach out to me on social media. LinkedIn is usually preferable!

Selling financing, where the seller is in effect the bank loaning the buyer the money to purchase the property that the seller is selling, isn’t particularly common (especially in times like now, where the monetary policies have eased and interest rates are low).  But it does have its place and time, and knowing the pros and cons of seller financing can be helpful in your next real estate transaction. 

Let’s start with the cons of seller financing, as the list is short.  

1. As the seller of the property, you’re foregoing the immediate payment of funds which could be invested elsewhere at a higher interest rate. 
2. If the buyer fails to make payments, you (the seller) will be forced to foreclose on the property, which could be expensive.   This can be a lengthy process, during which you’ll need to pay for the insurance, taxes, and any HOA fees.  Then you’ll need to make the repairs to bring the property up to a condition where it can be resold.  
3. You could become subject to regulatory restrictions, such as those which prevent foreclosures during the current pandemic and require mortgage forbearance. 

If those potential downsides haven’t dissuaded you, let’s talk about the benefits of financing your next property sale.  

1. Since you’ve sold the property, you are no longer responsible for the costs of the home.  The new owner is responsible for the maintenance, taxes, insurance, HOA fees, etc. This leaves you potentially with a very high ROI. 
2. You can secure a downpayment against the loan, which helps mitigate the risks associated with future repairs and maintenance you might need to make should the property go into foreclosure. 
3. You might be able to sell your home at a premium, to a homeowner who otherwise might not be able to finance the home purchase. 
4. You can earn a premium interest rate.  In today’s market, I know real estate investors who are earning 7% to 15% on the outstanding balance of the loan. 
5. Seller financed loans are typically 5-10 years, which means that you’ll get your full balance sooner than a typical mortgage. 
6. You may be able to defer some if not all of the capital gains from the property sale over the term of the loan.  

So how do you know if seller financing is right for you?  Let the numbers answer that question.  If the downpayment and interest rate offer a better return than you can find elsewhere for the same risk, then it might be the right choice for you.  Of course, each situation is different … and everyone should consider consulting legal and financial advice before making a decision.   If you ultimately decide that seller financing is right for you, there are plenty of online resources to help you navigate the process of setting up and maintaining the loan.