Home warranties and homeowner's insurance are not the same things. A warranty is an additional form of protection available to homeowners that cover the expenses an insurance policy does not. For example, it will replace a broken appliance or pay to have plumbing replaced after a pipe break. Many homeowners now purchase warranties for their own use, but another potentially valuable time to consider one is when a home is up for sale. Many sellers look for ways to increase the desirability of their home and a warranty may be the extra bargaining tool that gains the attention of a buyer.
How Warranties Help Sellers
- A home warranty makes an older home seem more on par with a new build that comes with a builder's warranty.
- Knowing so many items are under warranty in the home is a stress reducer for nervous buyers that worry about being overwhelmed with a new mortgage payment and the possibility of unexpected sudden repairs.
- A warranty helps to avoid any legal complications if something the seller claimed was in excellent condition breaks immediately after the sale.
- A warranty helps a home stand out from other comparable homes in the area.
- The home may sell faster and at the asking price because the new owner is not attempting to calculate for potential unforeseen expenses.
What Sellers Should Remember
- The warranty period lasts for one year and should be purchased soon after the home is placed up for sale. That will make it possible to transfer the warranty into the new owner's name for the remainder of the contract. An important point to remember is that it may mean paying for an additional year if the house is on the market for too long.
- The warranty company does not automatically cover everything in the home. If the appliances or the heating or plumbing systems are old or in poor condition the company may require updates before the policy is valid.
- Most basic plans begin around $300 - $400 and increase based on what is covered. Items like swimming pools and hot tubs and high-end appliances will raise the cost.
- Home sellers may get a reduced rate from the warranty company because many understand the potential benefit of continuing the policy with the buyer. Not all companies offer this discount but it is worth asking before beginning a new policy.
Home warranties require the homeowner to pay a small deductible when a breakdown occurs. An additional service fee for the technician that makes the repair is also paid by the warranty holder. Home sellers can make the deal a little more enticing by agreeing to cover these expenses for a specific period of time. Usually, 30-90 days is an acceptable length of time.