Home Warranties for Home Buyers and Sellers

Should you buy a home warranty?

Home warranties cover repair and replacement costs for appliances and other systems associated with a home. They can be purchased by either the home buyer or seller, and are often paid for at closing.

If you're constructing a new home it's likely your builder is required to provide a one year builder's warranty for problems you might encounter after closing. The warranties we're talking about here are a little different, since they cover any home no matter what its age.

Home Warranty vs. Insurance Coverage

Don't confuse a home warranty with a hazard insurance policy. A warranty replaces items that fail on their own. Your hazard insurance takes care of items damaged in fires, by wind, or other covered events.

What Does a Home Warranty Cover?

Standard coverage differs quite a bit by provider, so be sure to study each policy carefully before selecting one.

Many standard home warranties cover plumbing, appliances, and the heating and cooling units.
Some policies cover the roof.
Coverage for a a private well, septic system, and other items can often be purchased by paying an additional fee.

Warranty coverage is sometimes different for buyers and sellers.

For instance, a standard policy might not pay a seller's repair bill if the furnace dies before closing, but it will cover the buyer if that happens after the sale. Look closely at the coverage offered for your particular situation.

If you're working with a real estate agent, ask for literature from warranty providers. If they cannot give you information about more than one company, follow the links in the box above right to research different providers yourself.

How Long Is The Home Covered?

The typical home warranty policy is effective for one year with an option to renew coverage upon expiration. The renewal cost might be higher than the fee paid for the initial policy.

How Much Does A Home Warranty Cost?

Cost varies, but a standard policy is typically $350 to $450.

Grab a sheet of paper and list items that might be covered down the left-hand side. To the right, make a separate column for each policy and check-off items that are covered by each one.

Narrow It Down

Which items are included in the standard coverage?
Which items must be added on as separate policies? How much extra will it cost to add them?
What's the co-payment? This is the amount you'll pay when a repair person comes out to fix a failed system. Similar to a health insurance co-payment, it generally covers the entire cost of the repair. Co-payments vary but are often in the range of $35 to $55 per visit.
Has the warranty company been around long enough to show you a good track record for customer service?

How Does A Home Warranty Benefit Sellers?

A warranty makes your home more attractive to potential buyers, especially if appliances and other items are aged. If two homes are equally attractive to a buyer, the one that offers a home warranty might come out the winner.

Buyers shouldn't come knocking on your door after closing if something fails, but that doesn't mean they won't, especially if they feel you didn't disclose a defective item. Providing a warranty offers a little peace of mind.

The price of a home warranty is minimal, and since the policy can be paid for at closing you're not out any cash until the home sells.

How Does A Home Warranty Benefit Buyers?

You may be somewhat cash-shy after coming up with the funds required for closing. All you need is to replace the refrigerator two months later.

There are no rules that state who must pay for a home warranty. A seller can offer it as part of a marketing package. A buyer can purchase it or ask the seller to pay for the policy. Both parties can agree to share in the cost at closing.

Take a look at several home warranty companies if you think a policy will enhance your home sale or purchase.