How Does a Home Warranty Work for the Seller?

A home warranty is a service contract designed to cover the repair or replacement of major home systems and appliances that fail due to normal wear and tear. This type of contract differs from homeowner’s insurance, which typically protects against sudden, unexpected events like fires or natural disasters. It provides financial protection by addressing operational components within a residence, safeguarding against common breakdowns and potential repair costs.

Understanding Home Warranties for Home Sellers

For home sellers, a home warranty mitigates the financial risk associated with unexpected system or appliance failures during the sales process. This coverage protects sellers from significant repair costs if a covered item breaks down while the home is on the market or shortly after the sale closes. This protection is valuable if a home inspection reveals issues that might otherwise fall to the seller to fix.

Offering a home warranty enhances buyer confidence, making a property more attractive in a competitive market. It signals the seller stands behind the home’s condition and provides reassurance against immediate post-purchase expenses for covered items. This can lead to smoother negotiations, faster sales, and a more favorable selling price. Typical coverage includes major systems like HVAC, plumbing, and electrical, along with major appliances such as refrigerators, ovens, dishwashers, and washer/dryers.

When a covered item requires service, the homeowner typically pays a service fee to the warranty company’s technician. This fee is paid each time a service professional is dispatched to diagnose or repair an issue. The warranty then covers the remaining cost of repair or replacement, up to the policy’s limits, helping to manage unpredictable expenses.

Arranging a Home Warranty for Your Sale

Sellers commonly obtain a home warranty through their real estate agent or by directly contacting home warranty companies for quotes. To receive accurate quotes, sellers typically need to provide details about the property, such as its type, square footage, and desired level of coverage.

When selecting a provider and plan, sellers should evaluate company reputation, the scope of coverage, and the specific terms of the contract. Understanding what is included and excluded from coverage, along with any limitations or caps on payouts, is important. Many home warranty companies offer specific seller’s coverage, which may be complimentary during the listing if the seller commits to purchasing a full year of coverage for the buyer at closing.

The home warranty typically becomes active upon listing the property or at the close of escrow, depending on the agreed-upon terms. The financial arrangement can vary; the seller may pay the full cost, the buyer may pay, or the cost could be split as part of the sales contract negotiation. Often, the seller offers to pay for the first year as an incentive, with the cost frequently paid directly from the sale proceeds at closing.

Handling Warranty Claims as a Seller

If a covered system or appliance malfunctions while the home warranty is active and the seller is responsible, the seller must contact the home warranty company directly to report the issue. During this initial contact, the seller will need to provide policy details and a clear description of the problem.

After the claim is filed, the home warranty company typically dispatches a service technician to diagnose the problem. The technician will contact the seller to schedule an appointment. Upon the technician’s arrival, the seller is responsible for paying the service fee, which is a flat rate for the visit, regardless of the repair cost.

The technician will assess the issue and determine if it falls under the policy’s coverage for normal wear and tear. If the repair is covered, the technician will proceed with the fix or recommend a replacement if the item is beyond repair. The home warranty company then handles the payment for the repair or replacement, excluding the service fee. Maintaining clear communication and keeping records helps ensure a smooth resolution.