Written by McCall Robison | Last Updated January 29th, 2020McCall is a Senior Marketing Strategist who specializes in the health and safety industry. Over the past three years, she has conducted hundreds of hours of research and interviewed dozens of experts, so she can give consumers the information they need to make the best decisions for their health and safety. Her work has been featured on top sites, such as Forbes, Yahoo, and MarketWatch.
You’ve finally found the perfect home for you and your family. Now all that’s left is to put your house on the market. You’re probably eager to get your old home off your hands as soon as possible. But with so many homes for sale, how can you expect to stand out from the crowd? Staging your home based on modern interior design, listing at a competitive price, and having a quality real estate agent are great ways to make your home stand out from the rest. But what else can you do to make your home the best option in relation to the competition?
If you’re getting ready to sell your home, consider offering a home warranty. It can be a great tool to appeal to potential buyers and to set you apart from the competition. We’ve compiled the information below to help you decide if getting a home warranty is the right choice for you and your situation.
What is a home warranty?
A home warranty covers systems and appliances when they need repairs or replacement. When you get a home warranty, certain appliances in your home are covered for restoration or replacement. This is for those who don’t have the funds to make expensive repairs to systems and appliances in the home.
It’s not uncommon for home warranty companies to offer customized home warranty coverage. You’ll be able to choose which systems and appliances you want to be covered. This is a great opportunity to cover only older and/or costly systems. And if you choose to take certain appliances with you, such as a microwave or washer and dryer, you can omit it from your home warranty coverage.
Will a home warranty affect my sale?
Offering a home warranty can positively affect your sale. Home warranties are appealing to buyers, so it could help you sell your house faster. This is especially the case if the homes in your area stay on the market a little longer than you’d like. If anything, a home warranty can help motivate buyers to seal the deal.
Harry Keifer, a co-founder of Achosa Home Warranty, LLC (“ACHOSA”) agrees that "a home warranty can often be a tipping point that assists both the buyer and seller to come to agreeable terms for the sale of a home as home warranties give buyers peace of mind. The history of a property and maintenance of its systems are not always available for a client, so the home warranty can protect against the high costs associated with unexpected home repairs."
Carol Gee, an experienced home warranty customer tells us that when her sellers offered her and her husband a home warranty with the home, it made all the difference. "The sellers that we bought our lovely, older home from gave us the home warranty for one year and we continue to use a home warranty to this day. If I ever sell my home, I will definitely provide a home warranty."
"As new, first-time homeowners (my husband and I are both retired military veterans) who had lived in military homes almost our entire 20 years in service, we were not aware of home warranties and their value. Warranties are really beneficial, especially when you have older appliances."
Gee notes that even if you have newer appliances, a home warranty is still worth it. "Most folks think a home warranty isn't needed when their home and appliances are new. However, unless you have several thousand dollars to repair systems and appliances such as your AC, water heater, and oven (all the items I've used my home warranty for), a home warranty will save you a lot of money, even if you have newer appliances. Home warranties to me are much like health and car insurance. You hope you never have to use them but are happy when you do."
How much do home warranties cost?
If you’re considering getting a home warranty for the house you’re selling, there are a few things to keep in mind. Depending on the coverage you choose, a home warranty can cost anywhere from $300 to $700 a year. Typically, home warranties last for a year after the closing date on the new home. And depending on the company, service fees per repair can cost between $60 and $100.
What are the benefits of offering a home warranty?
It's an incentive for buyers
Offering a home warranty can be a good incentive to potential buyers. New and experienced buyers alike appreciate the safety net that a home warranty provides. The last thing they’ll want to do is get trapped with unexpected expenses on their new home. Especially if the home’s appliances are a few years old, a home warranty can save them money.
It gives buyers peace of mind
Any home that might be considered hard-to-sell will greatly benefit from a home warranty. For example, if you’re selling an older home, providing a warranty is a no-brainer. For buyers who are drawn to the visual charm of an older home but who balk at the thought of out-of-date or worn-down appliances, a warranty gives added peace-of-mind.
More buyers will take interest in your sale
If your home has been sitting on the market for a while, a home warranty can help drum up some interest. It could be the tipping point for potential buyers who weren’t previously interested in your home or who are choosing between multiple options.
Companies provide reliable technicians
Robert Taylor, a home rehabber/flipper in the Sacramento region, tells us that buyers can have peace of mind "knowing a reputable repair person will be doing the repair. They won’t need to spend time looking for a qualified person or wondering if the technicians are going to rip them off trying to sell something they don’t need. The last thing you need when you have an appliance failure is a salesperson trying to sell you a brand new system when all you need is a thirty dollar part."
It covers current building standards
Taylor also explains that home warranties cover current building standards in your area, which could save you a great deal of money. "A premium home warranty plan is coverage for repairs that may involve additional costs to bring repairs up to current building standards. For instance, what if a previous homeowner’s installation, repair or modification was not done according to local building codes? A premium home warranty plan will provide funds toward any expenses you may encounter in meeting current building standards.
"In some cases, appliances that fail may also require upgrading other components. For example, in California, if you replace your HVAC unit, you’ll be required to upgrade your ducting to be energy efficient (Title 24). If you buy only a budget home warranty [or no home warranty at all], you could end up paying several thousand dollars for the upgrades out of your own pocket."
It saves buyers money
Benjamin Ross, Realtor and Landlord, notes that, "Home warranties are very affordable and offer the new homeowner, who is still a stranger to his new house, a little peace of mind that everything will be okay. I would say from my experience that the most sought after benefit a home warranty has to offer is the ability for the homeowner to have the HVAC system repaired or replaced affordably." Repairs like this can be extremely costly, especially for a new homeowner. Knowing these types of repairs will be covered under a home warranty could put potential buyers at ease.
Clara Nicolosi, Owner and Broker of RE/MAX in Hot Springs, Arkansas, agrees with Ross that home warranties are a great benefit, especially for new homeowners. "I am a big fan of Home Warranties, especially for first time home buyers. The advantage of having the home warranty is that many of the mechanical and electrical items in the home will be repaired at a much-reduced cost. The cost is typically a "trade fee" and this amount can vary by home warranty company, but it is typically around $75." That is a small price to pay for a repair or replacement of a big system or appliance that would otherwise cost hundreds or thousands of dollars. For a new homeowner, that could do wonders for your budget.
"Having a heat pump go out in the winter and only paying a trade fee to get it repaired, or in some cases replaced, can make or break a new home buyer's budget. I would shop around and find the best home warranty company for your situation, and I am a big fan of having the name and phone number of a representative (a warm body)."
Taylor knows that not all buyers will think they need a home warranty, but it's important to explain to buyers that the peace of mind and added protection is worth it. "Buyers may be tempted to avoid a home warranty to save on costs, but it’s always a good idea to obtain one, even if your home is brand new. You should think of a home warranty like an insurance policy. You wouldn’t think of buying a house without fire insurance. It’s just as prudent to make sure you include a home warranty when you buy a home.
"After purchasing a home, you may not have the financial ability to handle any significant repairs or equipment failures. Appliances, HVAC systems, and hot water heaters can all fail without notice, even when they look brand new. It’s hard to predict if or when an appliance will fail, just like trying to predict if you’ll have a house fire."
When is a home warranty unnecessary?
When your home will sell quickly without one
As hard as it is to believe, there might be some situations in which offering a home warranty isn’t necessary. If other homes in your area are selling quickly, then it’s not worth spending your money on a home warranty. Buyers are clearly already looking for homes in your general area, so you probably don’t have to worry about your house sitting on the market for too long.
When the home you're selling is a foreclosure
Ross also explains that a home warranty likely isn't necessary if it's a home that needs major repairs — a foreclosure, for example, that is being bought by investors looking to buy cheap and flip the home quickly would not be interested in a home warranty. "This is a good thing as many of these homes are not eligible for a full home warranty anyways. Other than that, I can see no reason why a buyer would not want a home warranty included in the sale of their new home."
What are the downsides to a home warranty?
There's no pre-existing condition coverage
Warranty companies have a few specific requirements to keep in mind. Home warranties don’t fix pre-existing conditions or appliances that are already broken. Also, your buyers must regularly check and maintain every system and appliance covered by the warranty. An appliance that breaks down due to a lack of maintenance probably isn’t covered. The homeowners would have to arrange and pay for those repairs themselves.
You can't receive coverage for damages incurred by a broken system or appliance
A warranty covers any appliance or system that’s broken, but it doesn’t repair any damages that occur as a result of the broken appliance. For example, if a dishwasher malfunctions and overflows, the warranty fixes or replaces the dishwasher. But it doesn’t repair water damage that occurs because of the broken dishwasher. Again, that’ll be left to the homeowners to arrange and pay for those repairs on their own — or use their homeowner’s insurance.
They require hefty contracts
Ross also tells us the downside to a home warranty is the hefty contract you have to sign. "Sometimes you need to be a lawyer to fully understand the home warranty contract. For the typical homeowner, there is a lot left to assumption. It takes a lot of effort to dig down and see what your home warranty is really all about. Also, home warranty companies will go to great measures to repair before they replace. You might have an outdated HVAC system that really should be replaced, but the home warranty company may be reluctant and opt to repair rather than replace it. Most home warranty companies will go to great lengths to band-aid it for as long as they can. This can be very frustrating for the homeowner."
Certain companies may have slow repair times
Nicolosi also notes another downside. "A downside is each home warranty company has its rules and response times, and sometimes these may not align with how fast we would like the repair completed." To make this as convenient as possible, Nicolosi suggests "Do your research and pick the home warranty that is right for you." Look at home warranty reviews and see which company has positive feedback from consumers and quick response times. This will ensure you are satisfied with your home warranty company because they are responsive and have a satisfied customer base.
How can I find a good warranty?
Do your research
Before you take the plunge, do some research to ensure that you’re buying the best warranty. When you get on the phone with a warranty company, there are a few questions you want to ask. With so many warranty companies out there, it’s important to make sure you don’t get scammed. You want to know what to look for in terms of reputable warranty companies.
Read the fine print
When you finally decide on a company, make sure to read the fine print. There might be some terms and conditions that cause some problems in the future. For example, keep an eye on how long the warranty contract lasts. If it’s longer than a year, you may have reason to be suspicious.
Keifer recommends "that you do your own initial research on the market and on real estate professionals in your area to get started. Clarity is important, so take the time to read the fine print and ask questions along the way. Partnering with a reputable real estate professional that has quality local market insights is the best way to ensure your success in promptly selling your home at a price that meets your expectations."
What else should I consider when selling a home?
Think about getting a home inspection
Sure, a home warranty is a convenient service for new homeowners. But chances are, they’ll prefer not having to use it at all. Get a pre-home inspection to make sure that all major appliances and systems are running smoothly. Getting a home inspection will cost extra, but it’s well worth it. It’ll also give you a good idea of what your net proceeds are.
Repair appliances and make necessary upgrades
If any of your appliances are a bit worn down, make any and all repairs necessary. Even consider making upgrades if an appliance or two are in bad shape. Any steps you can take that will make the move-in process easier for potential buyers are well worth it.
Provide a warranty credit
Ross also suggests giving the buyer a warranty credit. "Assuming you are selling a functional home, you should offer your prospective buyers a warranty credit. This tells them that you are comfortable with the home's operating systems.
Is a home warranty worth it?
That’s the big question. Should a seller offer a home warranty?
Offering a home warranty can increase prospective buyers’ interest in your home. You can avoid a few major problems for your home buyers — and yourself — by making sure that you choose a trustworthy warranty company with an excellent reputation.
Most buyers will appreciate a home warranty with their new home. If your home has been on the market for a while, it’ll most likely help speed things along. Don’t underestimate the power of free services.
Post also contributed by Natalie Issa
Natalie Issa is a content specialist for Credit.com. Her experience spans working with a variety of content, including blog posts and journalistic articles, as well as film and podcasts. She’s applied her writing and editing expertise in the retail and digital industries at companies, such as Overstock.com and Deseret Digital Media, while applying her creativity to passion projects in her personal time.