The Value of Home Warranties: A Guide for Buyers and Sellers

The concept of a home warranty has surfaced as a pivotal consideration for both sellers and buyers in this ever-evolving real estate world. If you’re wondering if home warranties are worth it, well yes, but it will still depend on your individual circumstances. A home warranty is more than just a safeguard against unexpected repair costs—it’s an asset when it comes to the sale or purchase of a home. 

A home warranty is not a requirement when you sell or buy a house, but it can be very helpful in settling issues before they arise. So, whether you’re looking to maximize the attractiveness of your home for sale or are just starting your homeownership journey, let’s explore the value of home warranties and their impact on your real estate endeavors.

What Is a Home Warranty?

A home warranty covers major systems and appliances of your home, such as electrical, plumbing, water heaters, and HVAC systems, in the time that they need to be replaced, repaired, or serviced. Normal wear and tear on your home’s major appliances and systems is not covered by your home insurance, so this is a reason why you may want to consider getting a home warranty.

However, it’s important to note that home warranties don’t cover everything. They typically have exclusions and deductibles, and they may not cover all of the appliances and systems in your home.

Is a Home Warranty Required?

Unlike homeowners insurance policies, a home warranty is not mandatory. You have the option of buying it, usually as a one-year contract. Nevertheless, be thorough when deciding if a home warranty is right for you since different plans offered by home warranty companies cover different systems and appliances.

Is It Different from Homeowners Insurance?

Yes, a home warranty is different from homeowners insurance. A home warranty covers the repair, replacement, and service of home systems and appliances, generally for a one-year term. It’s issued by a home warranty company and is optional.

On the other hand, homeowners insurance provides financial protection in case of an accident or disaster, such as floods, tornado, or fires. It insures a home’s structure and belongings against a “known peril” listed in the contract. Homeowners insurance is often required by mortgage lenders.

As a Seller, Do You Have To Pay for the Home Warranty?

As I said above, it’s not a requirement, however, if you’re a seller, purchasing a home warranty for the buyer can be beneficial in various ways. 

#1 If something breaks down while you’re trying to sell your house, a home warranty could save you money.

Broken systems definitely won’t impress a buyer when taking a tour of a house. Sometimes your home might take a while to sell especially if it’s not a hot seller’s market and appliances and major systems could break down while you’re waiting for someone to make an offer. If a seller purchased a home warranty, this will cover the home while it’s on the market and then transfer to the buyer upon closing.

#2 A home warranty makes your home more attractive for buyers.

One of the biggest worries for people looking to buy a home is whether or not they’ll buy a money pit by accident. If you offer a home warranty as part of the sale, potential buyers can feel confident that their budget and investment are protected from potential breakdowns of home systems and appliances. Moreover, including a home warranty in the sale can alleviate the stress of the inspection process for sellers, potentially boosting buyers’ confidence and making them more inclined to choose the property, even if they decide to conduct an inspection.

#3 Home warranty companies may offer discounted or free seller’s coverage if you agree to purchase coverage for the home buyer.

These companies allow the warranty to transfer from you to the buyer at the closing sale, allowing you to save the seller’s cost of coverage. 

#4 A home warranty and homeowners insurance can work together to fully cover your assets.

While the two are different products, they can work together to provide more comprehensive coverage. For example, a home warranty would cover the cost of repairing a broken dishwasher, while homeowners insurance would cover the cost of replacing the dishwasher if it were destroyed in a fire.

As a Buyer, Why Would You Purchase a Home Warranty?

As a buyer, you may think that asking the seller for a home warranty is the way to go. It means more money will be saved by throwing the cost of the home warranty at the seller, won’t it? It might be the most suitable option, but keep in mind that whoever buys a warranty is responsible for its level of protection. 

Unless the seller has a heart of gold, they are likely to buy the cheapest home warranty plan which may lead to gaps in your coverage. Buyers can purchase a home warranty plan from a home warranty company. Here are the key benefits that can significantly enhance your homeownership experience:

#1 A home warranty offers financial protection against unexpected expenses.

Buying a home often comes with unforeseen replacement and repair costs for major systems and appliances. It can act as a safety net, covering the replacement and repairs of these items, which can save you a substantial amount of money.

#2 Home warranties have comprehensive coverage.

A home warranty typically covers a wide range of items, including plumbing, electrical systems, kitchen appliances, HVAC systems, and more. This ensures that you’re well protected against any potential issues that may arise in your new home.

#3 A home warranty offers you peace of mind.

Owning a home can be stressful, especially for first-time buyers. In addition to relieving some of this stress by assuring that you’re protected, you can rest easy knowing that professional help is just a phone call away.

#4 With a home warranty in place, you have a clear picture of your potential repair costs.

This predictability can be invaluable for budget-conscious homeowners. Knowing that you won’t face sudden and hefty repair bills can make it easier to manage your finances for other expenses.

#5 Savings Over Time.

While there is a cost associated with purchasing a home warranty, the potential savings from covered replacements and repairs can outweigh this expense over time. A home warranty is a smart investment in your home’s long-term maintenance.

A home warranty can be especially beneficial for buyers of older homes, as these are likely to have systems and appliances that break down. Moreover, buyers will have access to the home warranty company’s pre-vetted contractors. This is especially important if you’re moving to a new area or don’t already have a group of trusted contractors.

The Bottom Line

Whether you’re a seller or buyer, a home warranty is a valuable tool during a real estate transaction. Apart from protecting both the seller and buyer during and after the transaction, the warranty provides peace of mind and financial protection from expensive repairs. Before you buy one, though, read the fine print in the home warranty contract and carefully consider whether the warranty is likely to pay off.

Don’t let uncertainty define your real estate experience. Consider a home warranty’s potential advantages, weigh your options, and take control of your journey with confidence. If you have questions about home warranties or are ready to explore your options, don’t hesitate to reach out.

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