3 Sound Reasons Why You Should Offer a Home Warranty
A home warranty shouldn’t be treated as an automatic selling expense. Its value depends on the property, the coverage available, and how it fits into the transaction. In the right circumstances, however, a warranty may help manage certain repair costs while the home is listed, address buyer concerns about future repairs, and provide another option during negotiations. Those three potential benefits are worth evaluating before deciding whether the cost makes sense.
A home warranty is an optional service contract that may contribute toward repairing or replacing specified home systems and appliances when they fail from normal use. Depending on the contract, coverage may include HVAC equipment, plumbing and electrical systems, water heaters, and major appliances.
The operative word is “specified.” Coverage limits, exclusions, service fees, claim procedures, and other requirements vary by contract. The useful question for a seller, therefore, isn’t simply what a warranty costs. It’s what potential value the particular coverage adds to the transaction.
There are three areas to consider.
1. REDUCING SOME REPAIR RISK DURING THE LISTING PERIOD
Some warranty providers offer seller or listing-period coverage for eligible systems and appliances while a property is on the market. Depending on the provider and program, this coverage may be available at little or no upfront cost when buyer coverage is purchased at closing.
That creates a potential financial benefit for the seller. A functioning HVAC system, water heater, or covered appliance can fail while the home is listed or under contract. Without applicable coverage, the seller generally remains responsible for dealing with that problem while still owning the property.
If the failure qualifies under a seller warranty, the plan may contribute toward an eligible repair or replacement, subject to its service fees, limits, exclusions, and other terms.
Because seller coverage varies significantly among providers, confirm availability and contract terms before assigning any financial value to this benefit.
2. ADDRESSING SOME BUYER CONCERNS ABOUT FUTURE REPAIRS
An older system isn’t necessarily a defective system. A properly functioning furnace, air conditioner, water heater, or appliance may still have years of useful life remaining. Its age, however, can create uncertainty for a buyer who is considering the potential cost of future repairs.
A seller-provided warranty may help address part of that uncertainty by providing coverage for certain eligible failures after closing. It doesn’t guarantee the condition or remaining life of an item, and it isn’t a substitute for a home inspection. Its value is simply that specified repair or replacement costs may be covered according to the contract.
That can be particularly relevant for buyers whose available cash has been reduced by the down payment, closing costs, and moving expenses.
There can also be a practical post-closing benefit. If an eligible covered item fails, the buyer has an established warranty claim process and service provider to contact.
3. ADDING ANOTHER VARIABLE TO THE NEGOTIATION
A home warranty has a definable cost, which means it can be evaluated alongside the other financial and nonfinancial terms of an offer.
A seller might offer one when listing the property, introduce it later to address buyer concerns, or agree to purchase one as part of an offer or counteroffer. If a buyer is concerned about an older but functioning system, providing a warranty may sometimes be preferable to replacing an item that doesn’t currently require replacement.
If the buyer requests a warranty, consider that expense together with the purchase price, seller concessions, contingencies, closing date, and other terms. A warranty request that makes sense within one offer may not make sense within another.
The objective isn’t to provide a warranty simply because the buyer wants one. It’s to determine whether the cost contributes enough value to the overall agreement.
EVALUATE THE CONTRACT, NOT JUST THE PREMIUM
Home warranty pricing varies according to provider, location, property, coverage level, and optional add-ons. Service fees may also apply each time a technician is dispatched.
Compare covered systems and appliances, dollar limits, exclusions, service fees, claim procedures, maintenance requirements, treatment of pre-existing conditions, and other contract provisions. A lower-priced plan isn’t necessarily the better financial choice if its coverage is substantially more limited.
For seller coverage, also determine the effective dates, covered items during the listing period, applicable limits, and whether buyer coverage must be purchased at closing.
DECIDE WHETHER THE BENEFIT JUSTIFIES THE COST
A home warranty should earn its place in your selling strategy just like any other expense.
Seller coverage may reduce some repair risk while the property is listed. Buyer coverage may help address concerns about older systems and appliances. And the warranty itself may provide another variable during negotiations. The relevance of each benefit depends on your property and transaction.
I can help you evaluate those factors in context—the home’s systems and appliances, current market conditions, the terms of an offer, and the warranty coverage available. Then you can make the decision based on what the warranty actually contributes to your sale, rather than simply whether one is available.
