One of the more frequently asked questions by our Sellers during a listing appointment is “Do I really need a home warranty” as many of today’s real estate agents include this type of risk reduction product in their listing presentation. As a full service real estate company we are NOT in the home warranty business, although we have a duty to our Seller clients to inform them of their availability and the benefits of using a home warranty as both a marketing and risk management tool. First and foremost, home warranty companies are in the business to make money. Home warranty coverage generally includes limited coverage of the structure, appliances and mechanical components. Some home warranty companies are specialized and may only provide coverage in a specific area of the structure such as a basement covering cracks and rod holes leaks and nothing else. Home warranty applications and coverage are drafted to favor the warranty service provider as a way of reducing their liability during the warranty period and to reduce the incidence of fraudulent claims. Home warranty service providers generally don’t make a profit on a home warranty product the first year. Instead, they reinforce the importance of extending (renewing) the home warranty each year given the rising cost to the consumer to repair and/or replace covered items. As an example, replacing a sump pump could cost $250, or more, by a licensed plumber, almost the cost of a one year base rate home warranty. Generally the consumer pays a service call fee for each occurrence (varies by vendor) and are required to contact the home warranty provider first to ensure coverage. Normally home warranty companies have an approved network of contractors who are dispatched for approved warranty issues. There are some companies, however, that will allow contractors outside their network as long as the seller follows the warranty protocol for submitting claims. Home warranty providers have maintained that homes which offer a home warranty sell faster and for a higher price, although we have not been able to verify this trend through local sales history (generally asking price and property location have the greatest influence on local and regional real estate sales). Home warranty rates vary by type of property to be covered, ranging from mobile homes to multi-unit residential dwellings, size, amount of toilets (really), seller coverage, buyer only coverage, etc. Most companies sell optional coverage for properties which have hot tubs, pools, water softeners, etc. Policy cancellation terms vary by vendor as well and generally favor the warranty company. For our sellers, we always encourage the use of a home warranty product to reduce their liability during the listing period as well as after the sale. We would never minimize the importance of a home warranty as their use can only enhance the marketability of a Seller’s property, not hinder it. Many home warranty products still provide limited seller coverage during the listing period at no cost (although we see this trend declining rapidly in lieu of escalating service & material costs).
Prior to listing a home we encourage our Sellers to frequent this page to research the available warranty products and determine which, if any, are a good fit for their property and which will be best to enhance the marketability of their property and reduce their liability after the sale. If a Seller were to conduct a Google search for “home warranty companies” they might be surprised to find search results in excess of 400,000. Obviously that’s too many to review so in the interest of time, we have prepared a list of home warranty companies which service our area. So, using the links shown right, we encourage our Sellers to review each home warranty service provider’s contract, coverage, optional coverage and claims procedure prior to listing so that they can make an informed decision. For our seller clients, we may be able to save as much as 20% off the published warranty rates for the first year should they decide to use a home warranty product for their property. For seller coverage which can be converted to a buyer warranty at closing, we generally complete the home warranty application at the listing appointment. Once the warranty application has been completed, submitted and acknowledged by the warranty service provider in writing, the Seller’s coverage begins. If a Seller chooses to forego home warranty coverage we ask that they sign a waiver at the time of listing. We do this for two reasons, first and foremost to reinforce the availability and benefits of having a home warranty; (2) to reduce our company’s future liability should a claim of defect occur between the Seller and the buyer after closing. That said, in the absence of a home warranty, future liability can be reduced between a Seller and a buyer through the state required Seller's Disclosure Statement (PDF 60k download) and a signed buyer’s home warranty waiver prior to closing should the buyer decline a home warranty. Make no mistake, a reputable Buyer’s Agent will make an effort to negotiate a seller provided (or funded) home warranty product into the buyers purchase agreement. For further discussion regarding home warranties, please visit our blog for recent postings.