Whether the buyer or seller of a home pays for the home warranty depends on a few factors. First, the prevailing practice in your area may affect who pays. Second, the buyer’s motivation to sell the home may play a part. And, the age of the home and its appliances and systems could certainly influence whether a buyer would want to purchase a home warranty if the seller has not.
What Benefits Does a Seller Gain from Buying a Home Warranty?
Buying a home warranty for the house you have on the market does have a few benefits. Many believe it acts as an incentive for a buyer to look at your house. About 80 percent of home sales do include home warranties. The idea is that the buyer will know that whatever issues may come up outside of your contract after they buy your house may well be covered by the home warranty. For instance, if the furnace breaks down due to normal wear and tear within a year after they buy the home, it is likely the home warranty will allow for repairs or even replacement with a similar unit. Also, a home warranty purchased by the seller can protect the seller from unexpected costs during the time that the home is up for sale.
Some home warranty companies will even give discounts or free warranties to sellers, banking on the buyers picking up the home warranty for the year following the sale. Often real estate agents, themselves, will give home warranties to buyers as part of the home buying process. Another benefit to the seller providing the home warranty is that once the deal closes, you don’t have to worry about calls from the buyer if something unforeseen breaks down.
Why Would a Buyer Want to Purchase a Home Warranty?
On the buyer’s side, purchasing a home warranty can give you peace of mind. The home warranty takes effect at closing, so you are covered for all items under the home warranty contract for the next year. You don’t have to worry about clashing with the seller over items that didn’t show up in the home inspection. Of course, buying a home warranty means laying out more cash when you buy a home. They typically begin at $300 to $500 and go up from there, depending on company and the coverages you opt for. For example, it can cost more if you get special coverages for things like pools, spas and septic systems. The home warranty can generally be renewed each year.
As a buyer, you would most likely be interested in a home warranty for an older home, with used systems and appliances. Home warranties generally do not pay for anything that is still under manufacturer’s warranty. Therefore, it only makes good sense to weigh the cost of the warranty against its potential benefits. It is more likely that things will go wrong with older items. If the appliances and systems are covered under other warranties, they probably aren’t going to be covered; so, you will want to take that into consideration. Another important matter to take into consideration is the fact that the home warranty will not make improvements for you. If your range breaks down and can’t be repaired, it will likely be replaced with a comparable model to the one you lost, even if yours was a better brand.
What Does a Home Warranty Cover?
Whether you are a buyer or seller, it is imperative that you understand what the home warranty you wish to purchase does and does not cover. Remember, it is a service contract covering major appliances and systems in the home that may break down. Typically, home warranties cover:
- Air conditioning
- Dishwashers
- Furnace/heating
- Water heater
- Ductwork (to code)
- Garbage disposal
- Inside plumbing stoppages
- Ceiling fans
- Electrical systems
- Range
- Oven
- Telephone wiring
Believe it or not, appliances like washers and dryers are often optional coverages, as are refrigerators. Also, you need to be aware that if you do make a claim, you will have to pay a service fee each time. Not all potential repairs are going to be worth it. The good news is, these home warranties cover breakage for normal wear and tear. So, provided you maintain your appliances and systems properly, you shouldn’t have much of a problem filing a claim with a reputable company. Of course, you’ll want to do your homework on that point as well.
Know What’s in Your Home Warranty Contract
As with all contracts, you should read the home warranty before you purchase it, or as soon as you receive it from the seller. You may even want to ask to see the home warranty while you are considering buying a home. In addition to items that may not be covered, these service contracts have exclusions. Typical exclusions in a home warranty that would cause the denial of a claim are
- Excessive wear and tear
- Improper or inadequate maintenance
- Pre-existing conditions
Obviously, these exclusions leave a lot of room for interpretation. You must do your research into the home warranty company whether you are a buyer or a seller. You certainly want to work with companies with the best reputations for customer service and satisfaction.
So, remember, no matter who pays for the home warranty, it will only pay for the items covered by the contract. You will have to pay a service fee for every claim. And, exclusions may apply.
