Who Pays for Home Warranty: Buyer or Seller? 3 Real Estate Situations to Know
Who pays for home warranty: buyer or seller? Whether you’re buying a home or selling a home, this is a common question in real estate transactions.
And discussing a home warranty plan in initial conversations is always a good idea. It offers peace of mind for both sides of the equation.
That said, it can be confusing to know who is actually supposed to be the responsible party.
Let’s review some of the frequent situations.
Situation #1: The Seller Buys the Home Warranty
Many sellers choose to go ahead and buy a warranty for their home when they plan to list it. This is a value-add for the buyer. It's especially beneficial when selling an older home with aging HVAC systems, water heaters or other appliances.
The seller is taking into consideration that prospective buyers may have concerns about repairing or replacing these items after purchase.
By adding a home warranty as part of the home purchase, the seller is offering the buyer extra protection.
It’s an effective strategy.
In fact, one study showed homes with a warranty can add more than $2,300 to the bottom line and sell 11 days faster than homes without a warranty.
What does home warranty cover? Most home warranties cover the normal wear and tear of a main home system. Some items - like roof coverage - are considered an add-on.
Another bonus for the seller? It may save them from having to make major repairs before close.
Situation #2: Home Buyers Purchase the Home Warranty
Who pays for home warranty: buyer or seller? Sometimes, it’s the buyer.
If the homebuyer did not request or receive a home warranty as a part of closing, they can still choose to purchase one themselves.
There are benefits for the buyer to complete the home warranty contract in conjunction with closing. First, it usually means that coverage will begin once homeownership begins. And that the home warranty company will repair or replace broken appliances and home systems for the new homeowner.
No sweating it if an appliance breaks soon after move-in!
Another benefit? Some home warranty companies even offer discounts within a certain time frame after closing. This can be an opportunity for the buyer to buy a warranty at a reduced price.
Important note: A home warranty will not cover any items recorded in a home inspection. [What is a home warranty vs home inspection?] There may also be a small service fee for contractors to visit the home or perform repairs.
Finally, a homeowner can also purchase a warranty for themselves at any time. It doesn’t matter if it is months after close or years. That said, there is often a 30-day waiting period before coverage is effective.
Other Situations: The Title Company & Real Estate Agents
Who pays for home warranty: buyer or seller? Sometimes, it's neither.
Sometimes it's a title company. A title company handles many of the details of closing and they may even purchase a home warranty contract as part of closing activities.
The warranty is included in closing costs.
The type and level of warranty coverage will be based on agreements made by the buyer and seller. The coverage begins immediately after closing.
One other situation? Real estate agents will sometimes buy a home warranty for the new homeowner as a gift.
The ROI of Home Warranties
No matter who purchased a home warranty, it gives all parties peace of mind during a real estate transaction. It’s an additional cost that brings big benefits.
The average cost of a home warranty is only around $600 per year.
The home warranty covers the mechanical systems of the major systems and appliances of a home. These will be items like your HVAC system, refrigerator, stove, water heater, and more.
There is also the opportunity to add on other items, such as pools, septic systems and hot tubs. [Does a home warranty cover roof?]
Home warranties do not normally cover cosmetic issues, and they won't cover issues with systems not installed properly.
Compare Home Warranty Companies and Quotes
Who pays for a home warranty: buyer or seller? It depends on your situation. Home warranties can come from the buyer, seller, title company, or realtor.
No matter who purchases it, it's important to compare home warranty plans and rates. Coverage and costs can vary.
We've made this part super easy.
Use the Affordable Home Warranty tool to compare up to four of the top home warranty companies at once. Compare and contrast coverages and pricing to find the best warranty for your home. Click the button below to get started!