Home warranties offer buyers and sellers a sense of security about the quality of a home before they move in. If something goes wrong with your home’s appliances or mechanical systems, you may not be able to fix them yourself, so you could end up paying someone else to do it. Home warranties cover repairs made during the first year after you move in, so you won’t have to worry about paying for costly repairs out of pocket. Some home warranties also cover labor costs, so you won’t need to pay for expensive service calls.
With a plan in place, instead of freaking out, you can simply call the insurance company. Plus, home warranties are great ways to market your home and give buyers a little bit of extra peace of mind.
A home warranty isn’t the same as homeowners insurance
It can be easy to confuse home warranties and home insurance because they both cover home repair costs, but the coverage they provide is very different.
Homeowners insurance protects you against unforeseen damage to your property. It covers costs like replacing your roof after a storm or repairing your windows after a break-in. Insurance companies also offer discounts for certain improvements you might make to your home, like adding a security system or installing solar panels.
Home warranties pay a portion of the cost of repairs or replacements of certain parts of your home when they break down. These might include your heating system, AC unit, water heater, plumbing, electrical, and major appliance. Home warranties usually provide a minimum amount of coverage, but you may receive additional benefits if you purchase an extended warranty. You also may qualify for discounts on services like energy audits and pest inspections.
Home warranties vary in their coverage
Home warranties aren’t just for major repairs. Some policies cover minor issues, such as replacing faucets or toilets. Others might cover other items, such as an air conditioner or furnace. A few even cover things like water damage caused by a leaky roof. However, not every home warranty covers everything. For example, some policies won’t cover things like routine maintenance, such as changing light bulbs. Others may limit the amount of time you have to file a claim. If something goes wrong before the warranty expires, you’ll need to pay out of pocket.
For example: If your air conditioning unit breaks down, you could spend upwards of $3,250 to replace the entire unit. However, your home warranty may cover a portion of the costs. How much your policy covers depends on your provider and coverage details.
A typical home warranty is going to cover things like:
- Appliances like your refrigerator, dishwasher, washer/dryer, oven, stove, etc.
- Air conditioning & furnace
- Internal plumbing
- Electrical systems
- Water heater
- Ceiling fans
- Smoke detectors
Additional or optional coverage may include things like roofing, ductwork, pest control, sump pump, septic system, and more.
A home warranty provides your buyer with peace of mind about their purchase
You can offer your buyers a home warranty to help them feel confident when buying your property. Home warranties give buyers the assurance that if there is an issue with the appliances or systems in your home, you’ll fix it at no cost to them. That could be enough to convince them to buy your home.
Existing home warranties are often transferrable from the seller to the buyer
Homeowners often purchase a home warranty during the purchasing process. Home warranties are usually purchased for $1,000-$2,500 per year, depending on the coverage offered. Some sellers choose to use a limited seller’s warranty instead of a full seller’s warranty. A limited seller’s warranty is usually less expensive than a full seller’s warranty, and it covers repairs for 12 months after closing. Most home warranty companies offer refunds if the homeowner decides not to renew the contract.
A seller’s home warranty protects you during the listing period
A home warranty can be a great tool to help protect your seller if there are certain repairs that need to be made before closing. For example, if there is a problem with the roof, the seller could get a roof replacement quote. Once the seller gets the estimate, they can submit it to their home warranty provider along with the request for service. Then, once the claim is submitted, the home warranty company will pay for the repair out of its own pocket while the seller waits for reimbursement. This helps protect the seller from unexpected repair costs at the last minute.
A home warranty is useful in negotiations when buyers present repair requests
If you’re selling a house that needs repairs, then you should consider offering a seller’s warranty. A seller’s warranty will cover any repairs made to the property during the time you own it. You’ll need to pay for the cost of the repairs out of pocket, but if you sell quickly, you won’t have to worry about making those payments.
However, you might not want to offer a warranty for every single item on your buyers’ repair list. For example, if you’ve got a leaky roof, you could offer a warranty on the roof itself. But if you’ve got a broken dishwasher, you probably don’t want to offer a warranty on that. On the other hand, if you’ve got an old furnace that needs to be replaced, you could offer a full replacement warranty.
This strategy works well for both parties. The seller gets to keep the money they were going to spend on repairs, and the buyer gets to save money on repairs and also gets the benefit of the home warranty if any issues arise.
Partner with a real estate agent
Find an experienced, top-performing agent to help guide you through your home warranty options. Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!