For most of us, the purchase of a home is a huge investment. Once you purchase your home, you take on all of the responsibilities of a homeowner - including all maintenance and repairs of the home.

No home is perfect. No appliance lasts forever. You will make repairs and replacements while you own your home. Of course this is a reasonable expectation.

Still, no new homeowner wants to be faced with unexpected expenses soon after purchasing a home  - especially at a time when there are so many other areas on which you may wish to spend your money (such as furnishings and window treatments). Making expenditures to repair something in your home soon after buying your home is something no one wants. 

If you are purchasing a home that was recently built, it's likely that you have some protections available to you through the builder for certain items during a given period time. In addition, appliance manufacturers and other vendors may still provide some coverage. With any home over 1 year old, considering a warranty is a good idea.

Most people who purchase a resale property these days are strongly advised by their agents to get a home warranty. This home warranty may be purchased by the buyer or by the seller and is frequently negotiated into the contract for sale. Most sellers are willing to pick up the cost of the warranty for the first year.

The purpose of the home warranty is to provide buyers with a certain level of confidence that they will not need to come out of pocket to cover unexpected expenses after purchasing a home. The home warranty also provides benefits for the seller.  It reduces the probability that the buyer will feel the need to pursue damages from the seller should unexpected repairs arise soon after closing. Also, offering a home warranty in advance of the sale can help close the deal. It is an excellent marketing tool if it is advertised with the listing.

The home warranty may offer the seller pre-sale protection as well.  Home warranty companies offer seller protection covering the period of time during which the home is on the market. To get this, the seller needs to get the warranty about the time that they list the home.

A home warranty provides some general coverage and may be modified to increase levels of coverage in certain areas based on the needs of the seller or the buyer. For example, normally the warranty may not cover the repair of an ice maker. The warranty company may offer the option for additional charge of including icemaker coverage.

When the homeowner encounters the need for a repair, they simply call the warranty company. Usually, there is a fairly substantial deductible for each service call to discourage frivolous service calls - typically $50-$80. But, the warranty does provide fairly substantial protection in the areas that count the most such as repair or replacement of an air conditioning system.

A number of good companies offer home warranties. Your agent should have some suggestions. My experience has been it is better to stick with the larger companies, such as American Home Shield or Republic. There are numerous other companies out there that offer protection so discuss the options with your agent.

In order for a buyer to ensure that a home warranty is provided by the seller, it is important to understand how to negotiate this into an offer to purchase.  It is awkward to attempt to negotiate in a warranty after sales terms have been agreed to so be sure you include the warranty as part of your initial negotiations.

The cost of a home warranty typically runs between $400 and $600. This is a nominal figure in comparison to the price of many home repairs and to the price of the opportunity cost should the seller miss out on a potential buyer for not offering it. It usually makes good business sense for the seller to offer this. Still, if it is not offered, ask for it.

Whether or not a home warranty has very much economic value to the buyer is debated from time to time among agents I know. Obviously, if a major repair pops up, the value of the warranty becomes clear. For many home buyers, the warranty is never used and is allowed to expire. On average, most companies who provide home warranties say that they get about 1- 1.5 claims per warranty that they sell.

Some home buyers will choose to renew their warranty. Most expire one year from the date of purchase. If they do choose to renew the home warranty, the price for renewal is usually very close to the price of the original purchase. For owners of older homes especially, it may be a good idea to continue with the home warranty after the first year.

In summary:

1. A home warranty is not very expensive

2. It could make a difference in whether or not the seller is able to sell the home

3. It could save the buyer thousands of dollars in unexpected repairs and untold aggravation

4. Buyers with home warranties are less likely to pursue charges against sellers for nondisclosure

Get one!

Inspection Check List