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Why You Should Include a Home Warranty in a Selling Offer

Why You Should Include a Home Warranty in a Selling Offer

Buying a home has never been a stress-free experience. There’s a lot to worry about: financing the house, making sure you’re not buying a lemon, and legally documenting everything. Although there’s not much that can alleviate the stress that comes with buying a home, there are steps that can be taken to minimize that stress and provide peace of mind to buyers, sellers and real estate agents alike. One of those steps is providing a home warranty with a home’s sale. A home warranty protects the buyer of a home from unexpected repairs and replacements, but it may surprise you to learn that is also protects the seller and real estate agent.

A Home Warranty Protects the Buyer

As a buyer, buying a home is often the largest purchase they’ll make in their lifetime. They want to make sure they’re getting a great deal and aren’t stepping into a money trap. This is where a home warranty is often used to provide peace of mind to the buyer.

A home warranty plan covers systems and appliances in a home, like an A/C unit, furnace or oven, when they fail from normal wear and tear. Unfortunately, all systems and appliances within a home have a lifespan. After they’ve been used for a while, their mechanical and electrical parts may begin to fail because they are old. When those systems and appliances fail, it can be costly to have them repaired or replaced. For example, a new HVAC system can cost $5,230 on average. This is when having a home warranty can protect a buyer. If the home’s HVAC system fails from normal wear and tear, the home warranty will repair or replace the unit for a small service call fee. (This fee ranges between $50-$100 depending on the home warranty company.)

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Chad Holmes, Director of Sales at Landmark Home Warranty, said including a home warranty on a home’s sell can calm a buyer’s worries. “What the warranty does is provides them that additional peace of mind, going forward, if something fails, they do have that warranty in place,” Holmes said. “It lets them know if something breaks down from normal wear and tear that it will be repaired or replaced.”

One thing that buyers should be cautious about, however, is knowing what is and isn’t covered in a home warranty contract. Sometimes home inspections will bring up problems found in the home before closing, and the buyer’s agent may tell the buyer it will be all be covered under the home warranty. The problem with that is there’s a good chance the home warranty won’t cover the pre-existing problem. It is imperative to discuss the problems brought up in the home inspection, because the buyer could get the problems fixed with the seller, or get a discount on the house.

Why wouldn’t a home warranty cover a problem brought up in a home inspection? There are two reasons. First, most home warranty contracts begin on the date of closing. Like any warranty or insurance, a contract won’t cover something that was already broken before coverage started. If a buyer knowingly purchases a home with a broken furnace and then calls the home warranty company to repair it, there’s a good chance they won’t, since it was broken when they bought the home. This is just like if you totaled your car, and then tried to insure it and have the insurance pay for the repairs. It’s industry standard that these sorts of pre-existing conditions aren’t covered.

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Second, most home warranties don’t cover abuse or neglect brought on by a homeowner. If the seller has forgotten to change out his or her furnace filter for years and this is noted on the home inspection, the buyer should not expect this to be covered by a home warranty. They should ask the seller to provide some sort of compensation or repair the furnace before they purchase the home.

A home warranty’s main function is to repair or replace systems and appliances that fail from normal wear and tear. If a buyer understands what is and isn’t covered in a home warranty contract, they can better use it to help them offset expensive and unexpected repairs, Holmes said. “Although a home warranty isn’t a coverall, it gives homeowners the ability to take care of things that are unexpected expenses that come as a part of home ownership,” he said.

A Home Warranty Protects the Seller

At this point, it may seem like a home warranty is only beneficial for a home’s buyer. In fact, a home warranty can also protect the seller. Kimberly Cameron, Realtor and Associate Broker at Re/Max Properties West, said she includes a home warranty with every listing.

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When a seller includes a home warranty in a selling offer, most companies offer free listing coverage. This means the seller doesn’t have to pay for anything except service call fees up until the date of closing, Cameron said. At that time, if the buyer wants the home warranty, the seller will pay for their plan.

“If a buyer does not request a warranty, it is cancelled prior to closing with no charge to my client,” she said.

Shelly Walters, a Realtor for Re-Max Ability Plus, said this free listing helps the seller in two ways. Not only can it cover problems brought up by the inspection as long as they’re caused by age and normal wear and tear, but it can save the sellers money. “Since the home warranty covers a seller during the listing, I tell them it is a no lose situation,” she said. “If the sellers don’t choose the home warranty that they want to put with the listing, the buyer may request a much higher value of the home warranty. Therefore, they are also choosing the home warranty price.”

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Not only that, but according to a study done by American Home Shield, a home warranty sells a home faster and for more money. Holmes said this was most likely because a buyer feels more secure in buying a home with home warranty protection. “As the homeowner is looking at these homes, and comparing them, and they see that one home includes a home warranty they feel more comfortable buying it because they know breakdowns will be taken care of,” Holmes said. Bradley Asbury, Realtor/Agent for Century 21 Homestar, said he provides a home warranty on each of his listings for this reason. “There is more to it (psychologically) than just the warranty,” he said. “If you don’t offer it, buyers have almost a fear, that something is wrong, or being hidden. They associate the warranty as you putting your stamp of good faith on the property.”

A Home Warranty Protects the Real Estate Agent

Finally, including a home warranty on a home’s sale also protects a real estate agent. When selling a home, each Real Estate Brokerage must have Errors and Omissions Insurance, which will cover the brokerage and real estate agent if something has gone wrong while selling the home. Suzette Peoples, Broker for People’s Properties, said that most E and O insurance offers discounts for real estate brokerages who include home warranties with their sales.

Holmes said that this is because a home warranty provides an extra layer of protection for the buyer, and the insurance company recognizes that fact. “I think what that does is it shows that there’s something in place that will take care of the homeowner if something does go wrong. And then if the homeowner didn’t have that in place, they may be more likely to talk to the real estate agent,” Holmes said.

Have you used a home warranty? What has your experience been?

Featured photo credit: couple looking on house/luxorphoto via shutterstock.com

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Last Updated on March 24, 2021

8 Smart Home Gadgets You Need in Your House

8 Smart Home Gadgets You Need in Your House

We’ve all done it. We’ve gone out and bought useless gadgets that we don’t really need, just because they seemed really cool at the time. Then, we are stuck with a bunch of junk, and end up tossing it or trying to sell it on Ebay.

On the other hand, there are some pretty awesome tech inventions that are actually useful. For instance, many of the latest home gadgets do some of your work for you, from adjusting the home thermostat to locking your front door. And, if used as designed, these tools should really help to make your life a lot easier—and that’s not just a claim from some infomercial trying to sell you yet another useless gadget.

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Take a look at some of the most popular “smart gadgets” on the market:

1. Smart Door Locks

A smart lock lets you lock and unlock your doors by using your smartphone, a special key fob, or biometrics. These locks are keyless, and much more difficult for intruders to break into, making your home a lot safer. You can even use a special app to let people into your home if you are not there to greet them.

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2. Smart Kitchen Tools

Wouldn’t you just love to have a pot of coffee waiting for you when you get home from work? What about a “smart pan” that tells you exactly when you need to flip that omelet? From meat thermometers to kitchen scales, you’ll find a variety of “smart” gadgets designed to make culinary geeks salivate.

3. Mini Home Speaker Play:1

If you love big sound, but hate how much space big speakers take up, and if you want a stereo system that is no bigger than your fist, check out the Play:1 mini speaker. All you have to do is plug it in, connect, and then you can stream without worrying about any interruptions or interface. You can even add onto it, and have different music playing in different rooms.

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4. Wi-Fi Security Cameras

These are the latest in home security, and they connect to the Wi-Fi in your home. You can use your mobile devices to monitor what is going on in your home at all times, no matter where you are. Options include motion sensors, two-way audio, and different recording options.

5. Nest Thermostat

This is a thermostat that lives with you. It can sense seasonal changes, temperature changes, etc., and it will adjust itself automatically. You will never have to fiddle with a thermostat dial or keypad again, because this one basically does all of the work for you. It can also help you to save as much as 12% on heating bills, and 15% on cooling bills.

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6. Smart Lighting

Control your home lighting from your remote device. This is great if you are out and want to make sure that there are some lights on. It is designed to be energy efficient, so it will pay for itself over time because you won’t have to spend so much on your monthly energy bills.

7. Google Chromecast Ultra

Whether you love movies, television shows, music, etc., you can stream it all using Google Chromecast Ultra. Stream all of the entertainment you love in up to 4K UHD and HDR, for just $69 monthly.

8. Canary

This home security system will automatically contact emergency services when they are needed. This system offers both video and audio surveillance, so there will be evidence if there are any break-ins on your property. You can also use it to check up on what’s happening at home when you are not there, including to make sure the kids are doing their homework.

Featured photo credit: Karolina via kaboompics.com

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