A home warranty is a repair policy for appliances and systems in your home.
Home warranties usually cost between $300 and $600 annually.
You pay a service fee of between $50 and $100 per service call.
Home warranties can offer prospective buyers added peace of mind and act as a powerful marketing tool for your future home sale. Plus, if something goes wrong during the course of your home sale, such as a roof leak or a basement flood, your home warranty will help you resolve the problem quickly and return your house to selling condition.
Here’s what you need to know about home warranties—what they are, what’s included in a home warranty, and why you should offer one when selling your house.
What Is a Home Warranty?
A home warranty is a policy that covers either part or the total amount of costs if an appliance breaks or a mechanical system in the home fails. Home warranties are typically 12-month contracts that cost homeowners about $25 to $75 per month, with service fees every time you need a professional to repair or replace something in your home.
When comparing homeowners insurance vs. home warranty, insurance covers structural issues and the belongings in the home, but doesn’t necessarily extend to appliances or things like the HVAC system. You can customize your home warranty plans based on the type and amount of coverage you want.
How Does a Home Warranty Work?
When home emergencies happen, a home warranty saves you from paying full price for the repair or replacement. For example, if your dishwasher stops working, you file a claim with your home warranty company. The warranty company will then arrange for a repair person to inspect and repair your appliance.
You usually have to pay a small fee for the service call, referred to as a “trade call fee,” which averages around $50 to $100. But instead of paying the repair costs, your home warranty company covers the repair fees.
The Benefits of Offering a Home Warranty With Home Sale
If you’re in the process of selling your home, offering a home warranty comes with some significant perks.
Peace of Mind
Since you pay a set deductible each month, the only fee you have to worry about when issues arise is the service visit fee. Fewer unanticipated costs equals less stress, which can be a huge weight off your shoulders during the selling process. You can also add a seller’s warranty so that you’re covered while your home is on the market, and most companies offer this service for free.
Having a home warranty sweetens the deal for buyers since they know they’re protected for a certain amount of time after they purchase the home. If your home is comparable to other homes the buyers are considering, the additional perk of a home warranty may push them in your direction.
If you have a home warranty before you decide to list your home, you can transfer the warranty to the buyer through a simple process and for a nominal fee, usually about $25.
Prevents Post-Sale Problems
If an aspect of the home covered by the home warranty needs repair shortly after the buyers move in, they can work with the home warranty company to resolve the issue. A transferred home warranty is an easy way to prevent post-sale disputes about appliance or system issues.
The Drawbacks of Offering a Home Warranty With Home Sale
There are some cons you need to consider when understanding your home warranty. Most policies have specific exclusions and caps on the amount they will cover. Some contracts have complicated language that’s hard for a layperson to understand.
Warranty companies usually have a network of professionals they use, kind of like an HMO in healthcare. If those companies are busy with requests, you might face longer wait times than if you hired a repair person directly.
How Much Does a Home Warranty Cost?
On average, the annual cost of a home warranty is between $300 and $600, or $25 to $50 per month. When you need to have a technician come out, the service fee is usually $50 to $100.
What Does a Home Warranty Cover?
Coverages on each home warranty differ from plan to plan, but generally a home warranty covers:
Heating and cooling
Appliances including water heater, dishwasher, stove, microwave, and garbage disposal
You can usually add on coverage for items like your washer, dryer, refrigerator, garage door opener, hot tub, pool, septic system, and standalone freezer.
What Does a Home Warranty Not Cover?
Understanding what isn’t covered in a home warranty is equally important as understanding what is covered. Each appliance and home system has a certain amount of coverage available. If something needs replacement, the company will cover the cost of an appliance with the same size and efficiency. However, if the company can replace your appliance with a less expensive version of the same size and efficiency, they will do that instead of the more costly option.
Keep in mind that your home warranty company typically requires you to perform scheduled maintenance on your appliances. If an appliance fails due to improper maintenance, they won’t cover the cost of repairs.
Home warranties only cover the item that breaks down and don’t cover any household or structural damage that might have happened as a result of the issue. For example, if your dishwasher leaks and damages your floor, your home warranty will cover the cost to repair the washer but not the cost to repair the floor.