Why Would a Seller Offer a Home Warranty?
Learn how offering a home warranty can strategically position your home, attracting buyers and smoothing the sale process.
A home warranty, in the context of a real estate transaction, functions as a service contract designed to cover the repair or replacement of major home systems and appliances. This agreement typically extends for one year, providing financial protection against unexpected breakdowns due to normal wear and tear. Unlike homeowner’s insurance, which addresses unforeseen events, a home warranty focuses on the functional components within a property.
Seller Motivations
Offering a home warranty can provide significant advantages for a seller in the competitive real estate market. This offering can instill greater confidence in prospective buyers, alleviating concerns about unexpected repair costs after purchasing a home. A warranty signals that the seller stands behind the property’s condition, offering buyers assurance.
Presenting a home with an included warranty can also differentiate the property from comparable listings. This added value helps a home stand out, making it more attractive to a wider range of buyers. This distinction can prove particularly appealing to first-time homebuyers who may feel less prepared to handle immediate, costly repairs.
Furthermore, a home warranty can help mitigate potential post-sale issues between the buyer and seller. If a covered system or appliance fails after the transaction closes, the buyer can contact the warranty provider directly for resolution, reducing disputes or demands for repairs from the seller. This proactive measure fosters a smoother transition for both parties. A home warranty can also serve as a valuable negotiation tool during the sales process. Sellers might utilize it as a concession to strengthen their position, potentially offsetting other buyer demands or encouraging a quicker agreement.
Benefits to the Sale Process
Offering a home warranty can tangibly impact the efficiency and financial outcomes of a home sale. Increased buyer confidence and a reduced perception of risk often translate into a faster sale, with properties spending less time on the market. Homes with warranties have been shown to sell nearly 11 days quicker on average.
The inclusion of a home warranty may also contribute to achieving a higher sale price. Buyers might be willing to pay a premium for the added security and convenience provided by a warranty, especially when facing concerns about the age or condition of a home’s systems. Studies suggest that homes with warranties can sell for 1-3% more than those without. This additional value can help justify the asking price or reduce the likelihood of price reductions during negotiations.
A home warranty can also facilitate a smoother closing process. It can prevent last-minute repair negotiations or delays that often emerge from home inspection findings, as the warranty offers a clear solution for potential future issues. If an item breaks down or is noted during inspection, the warranty provides a mechanism for addressing the concern without direct financial outlay or extensive haggling. This minimizes potential friction, making the overall transaction more streamlined.
Understanding Costs and Coverage
The annual cost of a home warranty for a seller generally ranges from $300 to $700. Additionally, a service call fee, or deductible, typically applies each time a technician visits the home, ranging from $75 to $125 per claim.
Most standard home warranty plans cover major systems and appliances, including heating, ventilation, and air conditioning (HVAC) systems, plumbing, and electrical systems. Common appliances like refrigerators, ovens, dishwashers, washing machines, and dryers are also frequently included. Specific coverage can vary significantly between providers and plans, so reviewing the detailed terms is advisable.
Sellers typically arrange for the home warranty to be purchased at closing, with the cost often paid at that time. This can be facilitated through their real estate agent as part of the sales contract. When selecting a provider, sellers should carefully review the terms, coverage limits, and any exclusions, as well as the service call fees and deductibles, to ensure the warranty meets expectations. Considering the reputation of the warranty provider is also an important factor.