In this article: What Is a Home Warranty? | Seller’s Home Warranty Cost | How To Purchase | Benefits | Bottom Line | FAQs
If you’re selling your home, you’ll want your systems and appliances to be in good working order. Many sellers purchase a home warranty during this time for peace of mind and to incentivize buyers. Unlike homeowners insurance, which covers homeowners in instances such as fire and theft, a home warranty covers a home’s most-used systems and appliances when they break down due to normal wear and tear.
We at the Home Media reviews team have created this guide outlining a home warranty’s cost to a seller. We explain home warranty plans, how much they cost, how to purchase them and their benefits.
What Is a Home Warranty?
A home warranty covers your home’s major appliances and systems when their manufacturer’s warranties run out and they break down due to normal wear and tear. Unlike homeowners insurance, which offers financial protection in the case of severe damage from a storm, theft, vandalism or other covered event, a home warranty covers home systems and appliances should they require repair or replacement due to normal wear and tear.
When a covered item breaks down, a contractor will come to your home, evaluate the system or appliance in question, and perform the necessary work. Like insurance policies, you’ll pay a monthly premium, but repairs to or replacements of covered items will only cost you a pre-set service fee.
A typical home warranty will cover items such as your air conditioning, dishwasher, plumbing system, washer and dryer, and electrical system. Unlike home insurance, a home warranty is not required to complete a sale on a property.
Types of Home Warranty Coverage
The following are the three main types of home warranty coverage:
- Appliances only. This category covers normal wear and tear on your home’s major appliances, such as your dishwasher, refrigerator or built-in microwave. In most cases, this category will not cover smaller appliances, such as a stand-alone microwave or television, though this varies depending on which policy you choose.
- Home systems only. Coverage for home systems includes your HVAC system, plumbing, electrical system, water heater and more.
- Combination. Some sellers opt for a policy covering both appliances and home systems for comprehensive protection.
On top of the standard coverage in your policy, you may opt for add-on coverage for specific appliances or systems. These add-ons will increase your policy’s premium. Common add-ons include the following:
- Hot tubs
- Home security systems
- Roof leaks
- Solar systems
- Swimming pools
What Is a Seller’s Home Warranty?
A seller’s home warranty protects the seller while their home is on the market. Most home sale contracts include provisions for keeping the property in the same condition it was on the day it was sold until the closing date. A seller’s home warranty protects the seller should any appliances or systems fail during this time.
A seller’s home warranty differs from a buyer’s home warranty in that a seller’s warranty can cover specific appliances or systems for a limited time, usually until closing. However, many sellers purchase a home warranty that lasts an entire year as a bonus for potential buyers.
What Does a Seller’s Home Warranty Cost?
The cost of a seller’s home warranty policy varies depending on the service provider, type of coverage and your location. Most home warranties cover a 12-month period, though some companies offer you the option to purchase a month-to-month policy.
There are three fees to pay attention to: the premium amount, additional coverage fees and service call fees. Based on our research, home warranties cost between $360 and $900 a year, on average. Monthly premiums range from around $39 to roughly $63. Add-ons can cost just $4 per additional item or up to $100 per month, depending on the coverage selected. Service call fees range from $65 to $150 per call.
These are ballpark prices; you will need to provide detailed information about your home to a home warranty company for a customized quote.
Sample Quotes for a Seller’s Home Warranty
We obtained quotes from American Home Shield (AHS) for a seller’s home warranty on a 2,000-square-foot home in Raleigh, North Carolina. AHS quoted us $550 for one year of coverage on systems; $700 for one year of coverage on systems and major appliances; and $800 for one year of coverage on systems, major appliances and additional home items.
If you’re looking for a cheaper home warranty plan, we requested quotes from Select Home Warranty for a seller’s warranty on the same home. The company quoted a yearly premium of $479.99 for a systems-only or appliance-only plan and $524.99 per year for a combination plan. Alternatively, customers can pay monthly premiums of $44.42 per month or $47.75 per month, respectively.
How To Purchase a Seller’s Home Warranty
Purchasing a seller’s home warranty starts with deciding whether or not it’s necessary. A home warranty is probably not worth it if you’re selling a home that is less than five years old with systems and appliances still under manufacturer’s warranties. A home warranty is a practical investment if your home is more than 10 years old and systems or appliances are nearing their replacement dates.
Here’s our step-by-step guide to purchasing a seller’s warranty.
- Start with your real estate agent. Your agent is your best source for home warranty information. An agent can recommend home warranty companies, explain your coverage options and note any exclusions. In many cases, the agent will handle the entire process for you.
- Choose your plan. The next step is choosing the coverage level you want. Most home warranty companies offer tiered coverage plans. Typically, a low-price plan will cover appliances only, a second-tier plan covers systems such as plumbing and HVAC only, and a third-tier plan will cover both appliances and systems.
- Compare coverage. Next, get quotes from at least three companies and compare coverage. Be sure to look for dollar caps on coverage. Many warranties cover repairs but avoid full replacements by sticking to cost caps just below the amount needed to replace an appliance or system. Look for companies with generous coverage caps, low premiums and comprehensive coverage.
- Research. Research each company online. Read customer reviews, and compare costs and coverage. If you can, read a sample home warranty contract and note any coverage caps or exclusions. You can also tap friends and family for advice.
- Find the right price for you. Get multiple quotes until you find a plan that fits your budget. In some cases, a home warranty provider may offer the warranty for little to no cost to the seller, provided the buyer agrees to transfer the policy into their name after closing.
- Purchase your plan. Once you’ve found a plan that fits your budget and home protection needs, let your real estate agent know you’d like to move forward with the purchase. They will advise you on whether to pay for it out-of-pocket or include it in closing costs. They should also make sure to note your purchase on any ads for your home sale.
Benefits of a Seller’s Home Warranty
A seller’s home warranty can reassure both the seller and buyer that should something happen to the covered home systems or appliances between the purchase date and the closing date, the warranty will cover any needed repairs. Here are some additional benefits to the seller:
- A home’s systems can degrade quickly without regular use, especially in a vacant home.
- A home warranty protects the seller from costly repairs should any system or appliance fail.
- A seller’s home warranty can usually be purchased without out-of-pocket costs. The policy’s cost comes from the home sale’s proceeds, not from the seller’s pocket.
- Most home warranties are fully transferable from the seller to the buyer. Some sellers purchase a full 12-month policy as an additional incentive to buyers and include the warranty transfer in the sale contract.
The Bottom Line
With adequate research and planning, a seller’s home warranty can benefit both the buyer and seller and make the sales process that much easier for everyone. Sellers are protected from unexpected costs, and, in many cases, there are no up-front costs on either side. When selling a house, cutting down on variables with a home warranty can lower stress and improve the experience.
A seller’s home warranty can be a worthwhile investment if your home is older than 10 years and there’s a chance a system or appliance might fail while it’s under contract. Costs average $200 to $1,800 per plan term (not including service call fees), depending on your policy, location and home size. Talk to your real estate agent and get quotes from at least three companies before making your final choice.
Frequently Asked Questions About Seller’s Home Warranties
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.