For buyers and sellers alike, a home warranty can be a valuable tool that seals the deal.
Sellers use home warranties as a negotiation tool to make their home more appealing. It’s a competitive advantage that gives buyers a reason to choose their home over others.
Buyers may want to buy a home that has a warranty because of the value and peace of mind it brings. They don’t want to worry about malfunctions or breakdowns shortly after moving into their new home.
In either case, both sellers and buyers win.
But who pays for the home warranty?
Sometimes, the seller will cover the cost. In other cases, the buyer will pay for it. Here’s a closer look at how buyers and sellers determine who pays.
What’s a Home Warranty and How Does it Work?
A home warranty is like home repair insurance, but it only covers the home’s appliances and major systems, including but not limited to:
- Duct work
- Air conditioning
- Ceiling fans or light fixtures
- Electrical systems
- Cooking range
- Garbage disposal
- Water heater
- Furnace or heater
Some home warranties will offer elective coverage to include your washing machine, dryer, or refrigerator.
When these items break down because of normal wear and tear, the home warranty will pick up the tab to repair or replace them. Home warranties are particularly important in homes that haven’t upgraded their appliances in several years.
Home warranty coverage can vary, but when a covered item stops working, the homeowner will call the home warranty company and file a claim. The home warranty company will contact a service provider to come to your home and fix the issue. If the company cannot repair certain items, they will replace the item.
Rather than paying for the total expense out of pocket, the homeowner will pay a small trade service fee, usually less than $100.
What Home Warranties Don’t Cover
It’s important to realize that having a home warranty doesn’t necessarily mean you will get an ideal outcome when something breaks. Typically, home warranty claims will be denied for pre-existing conditions or if there is excessive wear and tear on your system or appliance. Also, if an appliance or system hasn’t been properly maintained, the home warranty company may not pay to fix it.
If something in the home needs to be replaced, you will usually get a comparable replacement, not necessarily the latest model. Even if you had a more expensive item or brand, you aren’t guaranteed to get an exact replacement.
How Much Do Home Warranties Cost?
Home warranty costs can vary by area and provider, but they’re usually inexpensive. Most homeowners can expect to pay between $300 and $500 for a home warranty.
The actual cost will depend on the home warranty provider, the level of coverage, and your local market.
Who Pays for the Home Warranty: Buyer or Seller?
To settle the debate for who pays for a home warranty, the answer could be either the buyer or the seller.
Most times, the seller will purchase a home warranty to use as a negotiation tool. It’s a benefit to them because it can provide an incentive to the buyer.
Buyers can purchase their own home warranty if the seller doesn’t offer one. Buyers want peace of mind when moving into a new home and will pay for it if it might save them money in the long run.
Sometimes, the real estate agent may offer a home warranty as a gift to the buyer.
The person who pays for the warranty may also depend on local customs. In some markets, it’s common for sellers to pay for the home warranty, while in other markets it might be a rare occurrence.
Work with your local real estate agent to figure out the best course of action for an optimal outcome.
Home Warranties are Easy with Clever!
Whether you’re buying or selling a home, a home warranty can create a win/win solution, and Clever can help.
Sellers that work with Clever get instant cost savings on the process. Our Partner Agents work for a flat fee, which could save you thousands of dollars in commissions. You can use some of your savings to offer a home warranty and tip the scales in your favor.
Buyers that work with Clever are also at a financial advantage. Our Partner Agents provide buyers with a $1,000 Home Buyer Rebate, which you can use to purchase a home warranty if the seller isn’t offering one.