Love, Indifference and . . . The Home Warranty

At the suggestion of our real estate agent, when we sold our home in San Diego 9 years ago, we gladly paid for a 1-year Home Warranty for our Buyer. One week later when we were purchasing our home in Maine and asked about the Home Warranty, we were told by our real estate agent that “We don’t really do those around here and they don’t cover anything anyway.” Not wanting to appear more “from away” than we obviously were - - let’s face it, we had just driven corner to corner across the US-of-A - - we simply let it go. This was before I became a REALTOR myself - - we just didn’t know.

In some parts of the country, Home Warranties are routinely used; in other parts, not so much. There are agents who love them and those that are indifferent to them, so . . .

What is a Home Warranty & How Does It Work?

A Home Warranty is a service contract for the repair or replacement of specified systems and appliances in your home such as plumbing, electrical, heating, built-in appliances, etc. that break down as a result of normal wear and tear. There are a number of reputable Home Warranty companies that operate nationwide. For an annual fee, the warranty company will pay for repairs or replacements of specified parts, systems and appliances in the covered home. The warranty company contracts with approved, insured service technicians and the homeowner will generally pay a nominal trade service fee for each repair requested. If a covered system or appliance cannot be repaired, it may be replaced. As with any contract, it is important that you read it and understand which systems/parts and appliances in your home are covered and which are not. Most of the Home Warranty companies offer upgraded plans or flexible coverage plans that will cover additional systems and appliances for additional charges.

Who can purchase a Home Warranty?

Anyone – A Seller, a Buyer, a FSBO, your Aunt Millie!

Like we did with the sale of our California house, a Seller can agree, as part of the contract, to purchase a Home Warranty for the Buyer of the home. When a Seller agrees to provide this warranty, it is like saying, “My stuff all works fine right now, but you never know when something might break; I certainly don’t want you to have any unexpected problems, so I’m including this with the purchase to put your mind at ease.” It is a sign of good will on the part of the Seller.

A Seller can further benefit from the home warranty by opting to purchase, usually for just a bit more money, coverage for the home during the time it is on the market. What if the dishwasher dies during the listing period? And what if the dishwasher isn’t the only thing to go? With home prices down right now, do you really want to sink more dollars into your home if you don’t have to? Does the warranty company care if your appliances and systems are not new? Generally not, they just want them to be in working order.

When there are many homes on the market to choose from, any added incentive a Seller can offer is a good thing. If two homes are otherwise equal, a Home Warranty provided by the Seller could end up being the deciding factor. Has your REALTOR discussed including a Home Warranty for a Buyer on your home for sale?

Consider the case of a first-time buyer. They put most of their savings into the down-payment and closing costs and had just enough left to put up some nice curtains and buy that great area rug for the living room. It’s going to take several months for their savings account to recover. The first month they are in their dream home, the dishwasher dies. They knew it was 10 years old, but hey, mom’s dishwasher lasted 25 years! Home Warranty to the rescue - - no dishpan hands and the credit card balance is spared! So much easier.

What does a Buyer do if he wants the Home Warranty but the Seller won’t pay for it? There are no rules about who pays for a Home warranty – the Buyer can pay for the coverage or perhaps, negotiate with a reluctant Seller to share in the cost.

The Buyer may also elect to renew the home warranty. If you buy a house that came with a warranty and you like having it, the warranty company generally notifies you of its renewal and you can carry the coverage forward yourself. You might think of this as a way to control some unexpected expenses - - you know what the annual fee is and you know what your out-of-pocket will be for each service call. The warranty can make your budgeting process easier.

What is peace of mind worth to you? Could that be an incentive to purchase? For a buyer who doesn’t have extra cash stashed away for unexpected repairs, a home warranty could be an attractive deal-maker. Has your REALTOR discussed writing a Home Warranty condition as part of your offer?

Do all my transactions involve a Home Warranty? No, sometimes it isn’t possible, practical or realistic. But, I do discuss this option with every Seller (my company policy requires its agents to have Sellers sign a declination if they do not want to offer a warranty) and I discuss home warranties with every Buyer (ditto company policy here) when writing up an offer and negotiating a purchase and sale agreement.

So, Love or Indifference? I love having this tool in my box!