What Does a Home Warranty Cover?

house with front porch

Any new homeowner’s worst nightmare is for a major system or appliance in their new home to break down or malfunction after closing. Because of the unpredictable nature of homes, an expensive repair or replacement is expected during the first year of owning a new house. That’s why getting a home protection plan or warranty is wise. Home warranties reduce worry and stress in the first few months of living in your new home and long term. A home warranty covers the associated repair costs if something goes wrong, but who is responsible for paying for a home warranty?

Who pays for a home warranty: Buyer or seller dilemma

A common question, especially for first-time homebuyers, is whether the buyer or seller pays for a home warranty. In short, it depends. Whether the seller or buyer pays for a home warranty protection plan varies based on your local real estate practices. In many areas throughout the US, it’s normal for a seller to pay for warranty coverage because it’s a seller benefit in the purchase contract. In other areas, home buyers are encouraged to purchase a home warranty after closing to help their first year in their new home go as smoothly as possible.

Home warranty for buyers

In some real estate transactions, the buyer can request a home warranty as part of the purchase agreement. The buyer, in that case, is typically responsible for paying for the home warranty. Buyers can enjoy protection against unexpected repair costs during the first year of homeownership by having a home warranty.

Some key benefits of having a home warranty for buyers include:

  • Peace of mind: A home warranty provides added peace of mind, knowing that major systems and appliances in the home are covered.

  • Financial protection: With a home warranty, buyers don't have to worry about expensive repairs or replacements for covered items.

  • Convenience: Instead of searching for reliable service providers when a repair is needed, buyers can simply contact the home warranty company and have the issue taken care of.

Home warranty for sellers

While buyers may request a home warranty, sellers also have the option to provide a home warranty as an incentive to potential buyers. In these cases, the seller is responsible for paying for the home warranty. This added added value can potentially increase the chances of a successful sale.

How much does a home warranty plan cost the seller or buyer?

A wide variety of coverage options are available based on the age, size, and location of your home. A higher deductible reduces your premium on the annual home warranty price. Regardless of who pays for the home warranty coverage, most providers offer the option to pay your yearly premium upfront or in monthly installments.

How do home warranties work?

Each plan is slightly different based on what the agency offers, but most operate similarly:

  • The homeowner calls the warranty company when a home system or appliance breaks or stops working.

  • The warranty company calls a provider to inform them of the problem and that they are covering it.

  • The provider calls the homeowner to schedule an assessment or repair appointment based on the specific issue.

  • The provider fixes the problem. If included in the policy, the warranty company will pay to replace and install a new appliance when a repair isn’t an option.

  • The homeowner pays the provider a service fee for their visit. This service typically ranges from $50 to $100 and is verified in your warranty plan.

What do home warranties cover?

As stated, each plan is unique and may cover different systems and appliances. Review your home warranty agreement to verify what services are available and if systems or appliances can be repaired or replaced to ensure compliance with new regulations. Home warranties typically cover:

  • Air conditioning

  • Kitchen appliances

  • Washers and dryers

  • Doorbells

  • Furnaces

  • Water heaters

  • Ductwork

  • Garbage disposals

  • Plumbing stoppages

  • Ceiling fans

  • Electrical systems

Coverage varies from plan to plan and state to state. Review a copy of your policy before you commit to checking what’s covered.

How much does a seller purchase a home warranty for?

Most home warranty plans are budget-friendly, around $275 to $1,425 annually. If a seller buys a home warranty for the new buyer, they prepay it for one year. The homeowner then has the option to renew the policy once the year is up. Home warranties can be a part of the negotiating process when closing. Sellers sometimes toss a home warranty into the closing deal to help encourage quick finalization. If you need to remember if a home warranty is part of the purchase contract, check your statement or call your real estate agent to confirm. They’ll be able to give you the policy details and get you in touch with the warranty company. It’s usually possible for a homeowner to upgrade the policy within the first year if willing to pay the additional fee. The more coverage a plan provides, the less hassle you’ll face when something breaks down.

The responsibility for paying for a home warranty in a real estate transaction can vary depending on negotiations between the buyer and the seller. When buyers request a home warranty as part of the purchase agreement, they are typically responsible for paying for it. On the other hand, sellers have the option to provide a home warranty as an incentive to potential buyers, in which case they would be responsible for the cost.

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