How to Elevate Homebuyers' Confidence with a Home Warranty

Rachel Cherem

Written By Rachel Cherem

Published 04/29/24
How to Elevate Homebuyers' Confidence with a Home Warranty

For most people in a position to buy property, a home is among the most important and expensive lifetime purchases. Buyers are understandably cautious. The enormity of the financial investment and reality of being solely responsible for a host of essential home components leave little room for blunders and missteps. If you’re eager to sell your home, what can you do to calm the anxieties of skittish prospective buyers?

Tried and true real estate advice still applies: Take measures to boost your home’s curb appeal. Attend to any problems that might be flagged in a home inspection. Freely provide property documentation, real estate paperwork, and records of home updates and repairs. But another proven method of inspiring homebuyer confidence? Offer buyers a home warranty.

The benefits of home warranty coverage for home sellers are hard to overstate. Below is some information on what a seller’s home warranty might entail, how it supports both parties in a real estate transaction, and how to navigate purchasing and transferring a worthwhile policy.

Understanding Home Warranties in Real Estate

At its most basic, a home warranty is a service contract to repair and replace critical equipment in and around a home. The scope of the contract might be limited to a single appliance or system, but it more often encompassess a suite of kitchen and laundry appliances and the home’s plumbing, electrical, and HVAC systems. Some home warranties also include home maintenance services, such as gutter cleaning and pest control.

A home warranty works similarly to insurance on principle, but it is not the same as a homeowner’s insurance policy and should never function as a replacement for one. Insurance will reimburse homeowners if their homes or personal property are damaged or destroyed in something like a fire or severe storm. Insurance will not pay out, however, to replace a home appliance or system component that breaks down from years of wear and tear. This is where a home warranty comes into play. A warranty allows for the affordable repair and, if necessary, replacement of equipment that has degraded from everyday use. Warranties do not typically cover theft, accidental damage, fire and flood damage, and so on, so it’s best to think of a warranty and a homeowner’s insurance policy as complementary—two distinct ways to protect your home and belongings in different circumstances.

Types of Home Warranty Plans

A home warranty is not one-size-fits-all. There are different classes to support interested parties in specific positions relative to a real estate property. Broadly speaking, here are the types of home warranty plans you are likely to encounter:

  • Homebuyer’s Warranty

A homebuyer’s policy is a warranty that new homeowners can purchase upon closing on a home. Even following the inspection, new homeowners are reasonably unfamiliar with the idiosyncrasies of their new appliances and systems. A warranty provides some peace of mind that this equipment will be affordably repaired if an issue presents itself. Homebuyers’ warranties are especially helpful because of the potential savings they present at a time when a buyer’s financial resources might be spread thin.

  • Home Seller’s Warranty

Homeowners who anticipate selling their property in the near term can invest in a home seller's warranty. This class of policy functions similarly to a homebuyer’s warranty—the same appliances and systems are eligible for coverage—but the plan is meant to be transferred to the new homeowners once the home sale is finalized. Buying a home warranty when selling a house, as a gesture of good faith, can attract buyers and inspire confidence in the soundness of the property. And with the popularity of warranties in recent years, a “buyer asking seller for home warranty coverage” situation is quite common.

  • Realtor’s Warranty  

A third class of warranty plan is meant to support real estate agents and the properties they represent. Instead of the current or future homeowner investing in the policy, a realtor can partner with a home warranty provider to secure the same or similar services. Usually, the realtor passes the policy on to the buyer after the closing.

Key Components of a Home Warranty

The structure of a home warranty can vary somewhat from company to company, but most follow a predictable model. There are two main cost components associated with a home warranty: the premium and the service fee.

  • The premium is a fixed monthly or yearly expense that the policyholder pays to maintain active coverage. The amount depends on the breadth of coverage in the policy. A premium for a comprehensive plan that covers all standard home appliances and systems will probably be a few hundred dollars for the year. A policy that covers one or two appliances could be substantially less.

  • The service fee is an expense due only when the policyholder submits a claim. You can think of it as roughly analogous to a medical co-pay. The service fee might be anywhere from $75 to $150, or perhaps more for high-value plans. 

There are other key features common to most warranty plans that it pays to be mindful of. These include:

  • Waiting Period Home warranty providers don’t typically allow policy holders to submit a claim immediately upon signing a contract. There is usually a waiting period of 30 to 60 days. This is to prevent the fraudulent misuse or abuse of the warranty model. After all, a home warranty is meant to protect against the future threat of appliance or system malfunction, not correct issues that have already emerged as problems.

  • Coverage Caps Home warranties repair and replace expensive home equipment—to a limit. Some policies set coverage caps to avoid issuing exorbitant sums when a piece of equipment breaks down. For example, if a policy has a coverage cap of $2,500 but the policy holder requires a new $3,000 refrigerator, it is the policy holder’s responsibility to account for the $500 difference. Coverage caps can vary by company or even by policy.

  • Exclusions and Upcharges Most warranty plans include coverage exclusions. Specific appliances or system components might be excluded, or even particular brands or manufacturers. Warranty providers may also deny coverage for home equipment afflicted by preexisting conditions. In some cases, however, you might be able to secure coverage for traditionally excluded items and circumstances by paying a higher premium.

Why a Home Warranty Warranty Should Be Your Top Priority

A home warranty has the potential to relieve many of the anxieties—financial and otherwise—that come with owning a home. It also streamlines your home maintenance planning, making it easier to stay on top of the upkeep of your home’s large collection of appliances and system components. Here is how warranties are able to help you achieve that peace of mind.

  • Reliable Repair and Replacement Every homeowner sooner or later encounters the hassle of a major home appliance going kaput. The refrigerator won’t keep food cold, the dishwasher starts leaking, the oven won’t turn on… Every machine breaks down eventually. With a home warranty, all you need to do is submit a claim when an issue presents itself, and your provider takes it from there.

  • Home Services Many home warranty providers offer a variety of services to support month-to-month home maintenance. These services can include carpet cleaning, window washing, rekeying, pest control, gutter cleaning, and more. Home maintenance for first-time buyers and seasoned homeowners alike can be challenging to keep up with because of the time investment and physical demands, but it truly is essential. Regular gutter cleaning, for instance, forestalls the possibility of roof leaks and wood rot by preventing rainwater from collecting in the eaves. 

  • Professional Service Home warranty providers partner with contractors and home professionals of all trades, and reputable companies hold their partnered technicians to the highest of standards. When something in your home requires attention, you can be sure that you are getting the service of a licensed and experienced professional.

  • Customizability Every home is different. Every warranty should be as well. You can usually work with your provider to make the breadth of your coverage as expansive as you like. 

  • Transferability Home warranties may cover portable personal appliances, but most covered items are intrinsic to the physical home itself. This means that warranties can be transferred to new homeowners when a property changes hands. The transferability of warranty plans has made them particularly valuable in real estate. Research has shown that home warranties attract buyers, increase home values, and expedite home sales.

The amount of choice in the home warranty market is a good thing. It means that you can find a plan tailored to your specific needs and circumstances. But navigating the available options can feel overwhelming at first. Here are some of the basics to consider.

  • Type of Warranty Are you interested in a warranty as a seller, new buyer, or realtor? Is the transferability of your warranty important to you? What kinds of add-ons or home services are you interested in? Make your needs and expectations clear to your potential provider.

  • Cost of Home Warranty For seller and buyer parties alike, the cost of a home warranty should be a major concern. Consider the premium and service fee, but don’t overlook indirect or less obvious expenses. Ask about coverage caps, exclusions, and deductibles. 

  • Length of Warranty Warranty providers typically offer single- or multi-year contracts. Assess where you see yourself in a year’s, two year’s, five year’s time to determine whether an extended contract is appropriate.

  • Company Reputation Taking stock of a warranty provider’s reviews and track record should be part of your due diligence. Read up on the experiences other homeowners have had with your potential provider, and check how the company fares with consumer advocacy groups.

If you’re gearing up to sell your home, you might find that your investment in warranty coverage will be swiftly rewarded. A warranty is a show of good faith, a vote of confidence in your property that buyers appreciate. If you’d like to learn more about the ins and outs of how a warranty operates, call the Liberty Home Guard team at (866)-936-9559.

 

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