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Homebuyer warranty 

 April 6, 2019

By George  

minutes read time

Ask 10 different people about the value (or lack of it) of home warranties and you’ll probably get 10 different responses–everything from “huge waste of money” to “best thing we ever did. It saved us $2500!”–and just about every other comment in between.

Home Warranty packages are available through most Real Estate Agents. They vary somewhat in coverage (and therefore in price), but in general they will warrant the major systems of the house–heating and air conditioning, many plumbing and electrical components, and major appliances–for one year. Although there are some warranty programs that will take effect when you list the house (meaning that you, as seller, may have some coverage before the house is sold), all will give the buyer at least one year’s coverage.

Coverage. A home warranty covers repair or replacement of some major and minor items and components of a house. Typically, they will be on a 1 year duration, beginning at the time you take occupancy. Some of the items and components that are typically covered are:

Central Heating and Air Conditioning

Plumbing

Electrical

Water Heater

Refrigerator

Washer and Dryer

Range and Oven

Dishwasher

Microwave

Garbage Disposal

Garage Door Opener

Trash Compactor

Doorbells

Water Softener

Costs. The cost of a warranty will generally range from $300 to $600, depending on the level of coverage and/or the size of the house being covered, and will usually carry deductibles of between $25 and $100.

What you are buying, in essence, is an insurance policy protecting against the breakdown of any of the covered items. Like any insurance policy, its value is tied to its use–if you never use the warranty, you could have saved its cost. If you do have a need for it, you very likely may have saved money.

Are they a wise purchase? In a newer home (less than 5 years old for example) a warranty may not be necessary, other than for peace of mind. As a general rule, the components covered by a home warranty last longer than 5 years. In a home aged from 5 to 15 years, a warranty may be a wiser consideration, since the upper end of that age range is often within the life expectancy of such items as refrigerators, stoves and air conditioning systems. In a home that is aged 15 years or longer (especially one with older systems and appliances) a home warranty should bear strong consideration since the likelihood for repairs or replacements goes up as the age of a house increases. $500 in warranty and deductible costs are obviously preferable to paying $2500 or $3000 for a new heating system should you need it.

Should you offer a warranty up front? It may help the marketability of your house. If a buyer (especially a first time buyer) is comparing two homes, one with a warranty and one without, if all else is equal, it could be an added selling point for your house. It is much like doing a pre-listing whole house inspection. When you can remove doubts from a buyer’s mind, it will obviously work in your favor.

A warranty also may help to solve some post-closing hassles. If the heating system goes out the week after closing, a warranty could be a safety net for the buyer (and less potential aggravation for you). Most sellers are more comfortable when they know that, once the home goes to settlement, the chances are reduced for having any added responsibility to their former house.

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