Here in Washington state, the purchase and sale agreement includes an option to ask the sellers of a home to purchase a one year home warranty for their buyers. I often find that my first time buyers don't know what a home warranty is, and I've run across sellers that are unfamiliar with home warranties and what they do. Anyone buying or selling will need to address the issue, so let's go over the basics.
Essentially, a home warranty is an inexpensive, targeted insurance policy, designed to protect against major repair expenses. If, during the warranty period, something breaks or needs repair, the cost of the repair would be covered by the home warranty. The homeowner would only be responsible for a service fee. That service fee typically ranges from $75-85 per visit.
Some homeowners keep a home warranty policy on their home for the entire time that they own the home, others keep the policy for the first year or two of homeownership, and some skip it altogether. That crucial first year is especially important for first time homeowners. The purchase of a home can drain savings accounts, and routine maintenance costs add up quickly. Protecting your finances from a large, sudden expense during the first 12 months after a purchase is a smart move.
Home warranty companies differ, but you can expect a one year home warranty to cost between $350 and $500. Each company will offer different services or packages, so if you decide to purchase a policy or ask for one, it's important to shop around to find the company and package that provides the most benefit.
In a slow market, sellers may be willing to purchase a home warranty for their buyers. However, in a competitive market, requesting a home warranty can weaken an offer. A buyer can always purchase the home warranty for themselves if they want a home warranty but can't get one from the sellers. In a highly competitive market, buyers are better off purchasing their own policy and leaving the request off of their offer.
Do I think that everyone needs a home warranty? No. Buyers and homeowners with enough savings to cover unexpected expenses and emergencies are probably ok foregoing a home warranty if they want to. Do I think that it's a good idea for sellers to provide a home warranty to their buyers? Yes. If it's financially feasible, a home warranty can offer piece of mind and a little bit of goodwill, and those can go a long way towards ensuring a smooth transaction. For more information about home warranties, take a look at some of the companies that provide home warranties.
American Home Shield
Fidelity National Home Warranty
Old Republic Home Protection