Buying a Home: Ask the Seller to Buy a Home Warranty

When you make a purchase offer on residential property, consider asking the seller to buy you a home warranty. It's a buyer's market, and unless you are making a ridiculously low offer, most sellers will not have a problem purchasing the warranty. In fact, a home warranty can benefit the seller as much as the buyer.

A home warranty is an insurance policy on the property, covering items such as the appliances, air conditioning, electrical or plumbing. Normally the policy is for the first year the new buyer owns the home. If something breaks down in the house, the new owner pays a service call, yet it is minimal when you consider the cost of repairing or replacing an air conditioning unit, water heater or dishwasher.

Coverage varies, and one policy may cover the air conditioning while another does not. The price of service calls also varies. There are add-on features, such as additional coverage for the roof or a swimming pool.

Normally the buyer or seller will specify the maximum cost the seller will pay for the policy. In our area basic home warranties are under $400. Unless the seller already has an existing home warranty policy, that will be passed onto the buyer, a buyer can request to choose a policy that best fits their needs. As long as the seller knows up front what it will cost, choosing the policy should not be an issue.

After an offer is accepted, the buyer can ask the real estate agent or title company to provide them with brochures from different home warranty programs. During the escrow period, buyers can read through the literature and decide what policy best fits their needs. If they discover an additional coverage they want, which cost more money, the buyer can always put in the extra amount to cover the upgrade.

One reason home warranties benefit the seller, is that should something go wrong with the house within the first year, such as the air conditioning crashing, the buyer will be less likely to seek damages against the seller, since the item is covered under the home warranty program.

When making a claim, it is important that the policy holder follow the company's procedures. If the dishwasher goes out, and you call your favorite repairman first, before turning it into the home warranty program, it is likely they will not reimburse you for the repair, and this might invalidate the policy.

We've had some clients that were very happy with their policy, and grateful that it was obtained. There have also been clients who swore it was a waste of money, and wouldn't purchase one again. We obtained a home warranty when we purchased our current home, and never used the policy. Yet, I know of clients who have replaced appliances, air conditioning and plumbing during the first year.

Homeowners have the option of renewing the policy after it expires, yet the renewal price is often significantly higher than the original. Some companies offer programs that will cover a seller's home while it is on the market, with no upfront fee. The seller agrees to purchase the policy when the house sells, and closes escrow.

Home warranties can give both the buyer and seller a level of comfort when transferring ownership of a home. Yet, it is essential for the buyer to fully understand what their policy covers, the price of the service calls, and procedures for filing a claim.