✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.
25% of homes that sell have a home warranty. Homes with warranties spend 16.14% less time on the market and yield a 0.91% higher sale price for sellers. So, the inclusion of a home warranty can be an advantageous decision.
A home warranty is a service contract that covers any expenses made toward maintaining home appliances and systems. Here’s everything you need to know about this essential warranty when selling your house.
⭐ Warranty Must for Home Sales
- The home warranty sector has experienced an annual growth rate of 3.7%.
- A standard home warranty costs $35 to $60 per month.
- Homeowners spent nearly $6000 on home repairs and maintenance while a home warranty only costs around $600 a year.
What is a Home Seller’s Warranty?
A home warranty is a property protection plan that helps meet home system or appliance replacement and repair needs. For instance, if your washing machine or plumbing requires repair, a home seller’s warranty claim can help meet repair costs.
Usually, home warranties come with a waiting period of 30 days. Therefore, you must apply for one as soon as possible to avoid any delays in claims later.
Home Sellers Warranty vs. Homeowners Insurance
| Basis | Home Seller’s Warranty | Homeowners Insurance |
| Concept | Covers home systems and appliance repair and replacement expenses. | Covers damage to homes and personal belongings. |
| Coverage Terms | Repairing, or replacing home appliances and systems in case of issues. | Finances for rebuilding or repair of property and belongings after accidents or natural disasters. |
| Cost | Based on coverage and add-ons discussed during the signing of the contract. | Based on property value, location, and risk factors. |
| Process of Claims | Homeowners must file a claim with the warranty provider. A contractor examines and repairs or replaces a home system/appliance. | Homeowners must file a claim, after which an adjuster assesses the damage and processes the claim to be approved. |
| Typical Coverage Exclusions | Pre-existing conditions and lack of maintenance. | Natural wear and tear, neglect, and certain natural disasters. |
| Ideal Use | Maintaining the functionality of home systems and appliances during the sale process. | Adds a financial protective layer against natural disasters and accidents. |
How Does a Seller’s Home Warranty Work?
A Seller’s warranty begins while your home is listed for sale and is valid throughout the time your house is on the market. A typical home warranty will cover the cost of home system repairs and replacements. These include:
- Plumbing
- Appliances like washers, dryers, dishwashers, refrigerators, microwaves etc.
- Garbage disposals
- HVAC
- Garage doors and openers
To claim a warranty, contact your provider. They will send a technician to address the problem. Post payment of a service fee, the repair will be facilitated free of cost. You can also transfer the warranty to the buyer after the sale of your home.
- ✍️ Before you buy a Seller’s Warranty: You can conduct a home inspection to gain a comprehensive view of what’s at risk and should be covered under warranty.
How Much Does a Seller’s Home Warranty Cost?
The average home warranty cost falls between $300 and $600. An EMI option is also available with payments ranging between $25 and $50 monthly.
How to Choose the Right Home Warranty Plan?
Residential property with a home warranty sells 11 days faster than without one. Despite this, only 4% of American homeowners have one. This is because of a lack of information and awareness about which home warranty to purchase.
So, here’s what you can do to find the right home warranty:
1. Research and Compare Warranty Plans
Most home warranty providers offer tiered coverage plans to suit different needs. These include:
- Appliances only: This covers the natural wear and tear of your appliances such as refrigerator, microwave, dishwasher, etc.
- Home systems only: This covers plumbing, HVAC, electrical systems, etc.
You can choose either one of these plans or a combination of them depending on your needs. Make sure you have an accurate picture of your needs before researching and deciding on potential providers.
2. Discuss your Warranty Needs with the Provider
Analyze your needs and discuss them with your warranty providers for the best possible coverage.
For instance, you might have a couple of home systems that require repair or replacement. But your budget might not allow for all their coverage. In such a case, take your provider’s opinion on what should be covered and what needn’t.
3. Understand the Terms of the Warranty
You must pay attention to the finer print in the contract. Recheck what your warranty is covering. If required, contact the home warranty provider to add more systems or appliances to the coverage list as well.
4. Confirm Your Seller’s Home Warranty Contract
Once you’re satisfied with the terms, proceed to sign the contract. Make sure to keep all necessary documentation ready for the smooth process. These include property ownership papers, bank details, etc.
After signing the contract, safely store the home warranty contract until it’s time to claim a warranty under it.
Pros of Seller’s Home Warranty
Here are some of the definite upsides of getting a seller home warranty:
- Facilitates a Smoother Sale Process: System failures are red flags. A home warranty also addresses issues and presents a positive image to potential buyers.
- Offers Holistic Coverage: Home warranty offers coverage on home aspects that aren’t usually protected under insurance. These include HVAC systems, plumbing, etc.
- Increases Buyer Confidence: A home warranty assures the buyer that if anything were to break down, they could claim repairs or replacements swiftly.
Cons of a Seller’s Home Warranty
Here are a few shortcomings of home warranty:
Inflexible: Home warranties can come with specific exclusions. For instance, it may not cover pre-existing issues and also limit the amount of coverage.
Expensive: The seller’s home warranty operates on a contingency. So, the cost of the warranty might go unclaimed. Further, depending on coverage preferences, warranty costs can range from a few hundred to several thousand dollars.
How to Transfer a Seller’s Home Warranty?
You can transfer your home warranty plan to the buyer once you sell your house. Here’s how:
- Contact your home warranty provider and inform them of the sale. They will then ask you to share the buyer’s details and any other pertinent information to start the transfer.
- Share all necessary information about the buyer. This includes name, contact details, address, etc.
- You might have to pay a transfer fee depending on your warranty provider. Once done, your seller’s home warranty is now in the name of the buyer.
The cost of transferring a home warranty from seller to buyer might vary depending on the home warranty provider.
The Bottom Line
A seller’s home warranty helps you meet any sudden expenses as you gear up to sell your house. It allows you to ensure your property remains well maintained and puts its best foot forward for buyers.
Home warranties give you holistic coverage by protecting your property against problems that a home insurance policy doesn’t cover.
Frequently Asked Questions
How long does a seller's home warranty last?
A seller’s home warranty usually lasts for a year. You can renew it subsequently with the policy amount changing from year to year.
Can a seller's home warranty be renewed?
Yes, a seller’s home warranty can be renewed every year. However, the policy amount, terms, and conditions might change with renewal.
What is the typical cost of a seller's home warranty?
The average home warranty cost is anywhere between $300 and $600. However, these can vary with customizations and add-ons like coverage for rooftops and pools.
