Who Pays for a Home Warranty: Buyer or Seller?

A home warranty is an annual service contract designed to cover the repair or replacement of major home systems and appliances due to normal wear and tear. This contract differs from homeowner’s insurance, which typically addresses damage from unforeseen events like fire or theft. In a real estate transaction, the question of who covers the cost of a home warranty frequently arises, influencing decisions for both parties. The responsibility for payment depends on several factors inherent to the sale process.

Buyer’s Role in Home Warranty Payment

Buyers often consider purchasing a home warranty to mitigate financial risks associated with unexpected system or appliance failures after acquiring a property. The primary motivation stems from the desire for protection against costly repairs that might arise shortly after moving in. An average home warranty can cost between $300 and $700 annually for a basic plan, with more comprehensive options reaching up to $1,200 per year. Each service call typically incurs an additional fee, ranging from $75 to $125.

A buyer may choose to directly purchase a home warranty independently. Alternatively, a buyer might include a request for the seller to provide a home warranty as a condition in their purchase offer. This request is common when acquiring an older home or one with aging appliances.

Seller’s Role in Home Warranty Payment

Sellers sometimes offer to pay for a home warranty as a strategic incentive to attract potential buyers and facilitate a smoother transaction. Providing a home warranty can convey confidence in the home’s condition, potentially reducing buyer concerns about future repair expenses. This can be particularly beneficial for homes with older systems or appliances, offering a degree of reassurance to prospective purchasers.

A seller might present this offer directly in the listing, or it could arise during negotiations. By covering the cost, sellers aim to make their property more appealing in a competitive market.

Negotiating Home Warranty Costs

The decision regarding who pays for a home warranty is frequently determined during the negotiation phase of a real estate transaction. This discussion often involves real estate agents who facilitate communication between the buyer and seller. The inclusion of a home warranty, and the agreed-upon responsible party for its cost, is typically formalized within the purchase agreement.

Negotiations can lead to various outcomes, such as the buyer paying the full cost, the seller covering the entire expense, or a shared payment arrangement. For instance, a seller might agree to pay for the first year of coverage to make their offer more attractive. Alternatively, a buyer might request the seller contribute a specific amount towards closing costs, which could then be used by the buyer to secure a home warranty. These discussions are part of the broader negotiation of terms, including the sale price and other concessions.

If the home inspection uncovers potential issues, a buyer might leverage these findings to request a home warranty from the seller as a form of additional assurance. The agreed-upon payment responsibility is then clearly stipulated in the final contracts, ensuring both buyer and seller understand their financial obligations related to the warranty.

Elements Impacting Payment Responsibility

Several external factors and specific circumstances influence which party ultimately assumes the financial responsibility for a home warranty. The prevailing real estate market conditions play a significant role; in a seller’s market, where demand outstrips supply, sellers may be less inclined to offer or pay for a warranty. Conversely, in a buyer’s market, sellers might proactively offer a home warranty to differentiate their property and attract more interest.

The age and overall condition of the home also weigh heavily on this decision. An older home with original systems and appliances may prompt a buyer to strongly request a warranty, increasing the likelihood of the seller agreeing to cover the cost.

The findings of a home inspection can significantly shift negotiations. If the inspection reveals numerous aging components, a home warranty becomes a more compelling request for the buyer.

The competitiveness of a buyer’s offer, including the proposed purchase price and other terms, can influence a seller’s willingness to include a home warranty. Local customs and norms in a particular housing market can also establish expectations for who typically pays for a home warranty.