Do You Need a Home Warranty When Selling a House?
Considering a home warranty when selling? Learn its role in your sale strategy and how it can influence buyer perception.
A home warranty is a service contract that offers financial protection against the cost of repairing or replacing major home systems and appliances due to normal wear and tear. It serves as a distinct offering from homeowners insurance, which covers damages from unexpected events like fires or natural disasters. Offering a home warranty can be a strategic element in a home sale, influencing buyer perception and potentially streamlining the transaction process.
Fundamentals of a Home Warranty
A home warranty provides coverage for specific systems and appliances that malfunction from normal use, mitigating unexpected repair or replacement expenses. Typical coverage includes HVAC, plumbing, electrical wiring, and water heaters. Major appliances like refrigerators, dishwashers, ovens, ranges, built-in microwaves, washers, and dryers are also commonly covered.
Home warranties typically exclude pre-existing conditions, improper maintenance issues, and cosmetic damage. Structural components like walls, windows, and doors, or damage from natural disasters, also fall outside the scope of a home warranty. Optional add-on coverage is often available for items such as pools, spas, well pumps, septic systems, or central vacuums.
Strategic Considerations for Sellers
Offering a home warranty provides peace of mind to prospective buyers, addressing concerns about unexpected repair costs. This can make a property more appealing and reduce the buyer’s perceived risk, especially for homes with older systems or appliances.
The annual cost of a home warranty typically ranges from $300 to $700. This cost is often negotiated, with options for the seller to pay, the buyer to pay, or for the cost to be split. This expense is frequently handled as part of the closing costs, coming from sale proceeds rather than requiring an upfront payment.
Most home warranties offered during a sale provide coverage for one year from the closing date. Sellers may also obtain a limited warranty covering the home during the listing period, often for up to 180 days. This protects the seller from unexpected repair expenses while the home is on the market. A home warranty can also help prevent post-sale disputes, contributing to a smoother transaction.
Procuring and Implementing the Home Warranty
When selecting a home warranty provider, research their reputation and customer reviews, which often highlight service quality and claims process efficiency. Compare different providers’ coverage levels, as plans vary from basic to comprehensive with additional options. Understanding what each plan covers and excludes is essential to avoid surprises.
Compare service call fees, also known as deductibles, which typically range from $75 to $125 per technician visit and are paid regardless of the repair outcome. Review contract terms, including coverage caps and payout limitations for specific items or total annual claims. Some contracts also specify response times, with many providers aiming to dispatch a technician within 24 to 48 hours after a claim is filed.
Once chosen, the home warranty is typically purchased to activate at closing. While some policies have a waiting period, many real estate transaction warranties begin immediately upon closing. The home warranty is then formally conveyed to the buyer as part of the sales agreement, often by including a clause in the purchase contract and providing policy details at closing. Sellers should retain all related documentation.