Homeowner Warranties: A Study of the Need and Demand for Protection Against Unanticipated Repair Expenses

The decision to purchase a home often is made without complete information concerning the structural soundness of the dwelling or the condition of its mechanical systems.
This paper presents detailed information on the nature and magnitude of unanticipated home repair costs on the basis of data obtained from a HUD-sponsored survey of some 1800 households that purchased existing homes two years prior to the survey. The potential market demand for home inspection and warranty programs is estimated on the basis of data obtained from a second survey of approximately 1800 recent home purchasers. Finally, the economic feasibility of two potential government warranty programs is examined and a number of tentative policy conclusions are drawn.