Types of home warranties: Seller’s warranty and buyer’s warranty
Real estate transactions are usually perceived as daunting, and a lack of knowledge about how to go about them can scare people away from buying real estate or engaging in its related activities.
Lucky for you, we are here to unveil all there is to know about home warranties, specifically seller’s and buyer’s warranties- a very important element of real estate transactions.
Home warranties offer protection and peace of mind to both the buyer and seller and if you read ahead, you’ll be able to achieve both!
What are home warranties?
Becoming a new homeowner or real estate seller will leave you buzzing with excitement; however, the stress about managing the cost of repairs and maintenance of household systems and appliances will no doubt also be lingering in your mind.
But you need not worry- because you have the economical option of gaining a home warranty!
A home warranty is a contract that spans a fixed duration and covers the cost of maintaining household systems and appliances.
To facilitate both the buyers and sellers of real estate, there are two types of warranties- the buyers and sellers- to protect both.
Understanding the coverage and benefits of both warranties is crucial, and you are advised to review the contract, be aware of limitations and exclusions, and make claims accordingly.
What are seller’s home warranties?
The property seller buys a seller’s home warranty to protect against potential breakdowns of major appliances and home systems during the selling process. It offers sellers financial security until the sale is finalised. However, sellers’ warranties are limited and may not cover cheaper items like countertop microwaves and ice machines.
What are the benefits of acquiring a seller’s home warranty?
1) Protection for older and major appliances
Seller’s home warranty covers major appliances and home systems that are older or no longer under manufacturer’s warranties, helping sellers avoid unexpected repair costs while their house is on the market.
2) The incentive for buyers
Offering a seller’s home warranty attracts potential buyers who are reassured by the coverage of major appliances and systems for a certain period. It increases the listing’s appeal and the likelihood of closing a deal.
3) Increased selling price
With the added assurance of a seller’s home warranty, sellers can list their property at a slightly higher price, potentially offsetting the warranty cost.
4) Faster sale
A seller’s home warranty can expedite the selling process by giving buyers confidence in the home’s condition and reducing concerns about unexpected repair costs, thus increasing the chances of a quicker sale.
What are the drawbacks of acquiring a seller’s home warranty?
1) Limited coverage period
Seller’s home warranties have a limited coverage period, usually during the listing period or shortly after the sale. Once the coverage period ends, sellers are no longer protected from repair costs.
2) Limited coverage of appliances as per the contract
Sellers must carefully review the warranty contract to understand what is covered and what is not. Not all items or damages may be included, so sellers should know the limitations.
3) Potential for high out-of-pocket costs
While the warranty covers certain repairs or replacements, sellers may still need to pay a service fee or deductible for each claim, leading to high out-of-pocket costs.
4) Contractual exclusions
Seller’s home warranties may have exclusions that vary depending on the warranty provider. Exclusions can include pre-existing conditions, cosmetic issues, and certain types of appliances or systems that are not covered.
What are buyer’s home warranties?
Once you have thoroughly learnt all the basic steps to becoming a homeowner, it is due time for you to dive into a lesson on purchasing a buyer’s home warranty to protect against unforeseen expenses for major appliances and home systems after purchasing a property.
Purchasing a buyer’s home warranty provides the homeowner financial security and peace of mind. One of the major benefits is that it also offers access to trustworthy contractors through the warranty company.
It is important to note that homeowners can buy the warranty or ask the seller to cover the first year.
What are the benefits of acquiring a buyer’s home warranty?
1) Cost-saving on repairs
Buyer’s home warranty covers the cost of repairs or replacements for major appliances and systems, helping buyers avoid unexpected expenses after purchasing a home.
2) Access to pre-vetted contractors
Home warranty companies provide access to pre-screened contractors for repairs, saving buyers time and effort in finding reliable service providers.
3) Peace of mind
With a buyer’s home warranty, homeowners can enjoy peace of mind knowing that they are financially protected from unexpected repair costs, allowing them to focus on settling into their new home.
4) Transferability
In certain cases, buyers get additional benefits, such as the warranties being transferable to subsequent homeowners considering the property is sold within the warranty period. This can increase the home’s resale value and lead to a great supplier of readily available home buyers because they can acquire the remaining coverage and enjoy the same benefits.
What are the drawbacks of acquiring a buyer’s home warranty?
1) Waiting periods
Certain contracts highlight waiting periods before the warranty comes into effect. This waiting period may be concerning because, during this time, buyers may not be eligible for certain repairs or replacements.
2) Limitations on coverage of appliances
Your buyer’s home warranty may have certain limitations on the total amount of coverage or specific coverage caps for certain appliances or systems.
3) Contractual exclusions
A buyer’s home warranty has exclusions, which buyers must review carefully.
Exclusions may include pre-existing conditions, improper maintenance, and cosmetic issues. Coverage may also not extend to certain appliances, systems, or damages considered optional or uncommon.
4) Value depends on the market
The value of a buyer’s home warranty may vary depending on the real estate market. In a seller’s market, sellers may be less inclined to pay for a buyer’s warranty. Therefore, buyers should consider market conditions and negotiate accordingly.
Tips for making claims on home warranties
We’ve highlighted tips and points you must remember while deciding whether to claim a home warranty.
However, if you want to continue learning more about the types of warranties before claiming them, refer to the article about sellers vs. buyers home warranty at Cinch Home Services.
Points to consider when claiming a seller’s home warranty
- Coverage period understanding
Seller’s home warranties usually have a limited coverage period, typically during the listing period or shortly after the sale. Make sure you know the specific coverage dates.
- Contract and exclusions review
Carefully read the warranty contract to understand what’s covered and what’s not. Be mindful of exclusions related to pre-existing conditions or specific appliances/systems.
- Claim eligibility check
Assess if the appliance or mechanical system issue qualifies for coverage under the warranty. Some warranties might only cover certain breakdowns or malfunctions.
Points to consider when claiming a buyer’s home warranty
- Waiting period awareness
Buyer’s home warranties often have a waiting period before coverage kicks in. During this period, certain repairs or replacements may not be claimable. Familiarise yourself with the waiting period specified in the warranty.
- Coverage limits and caps review
Note any restrictions or caps on coverage for particular appliances or systems. Ensure that the items you seek coverage for fall within the provided limits.
- Exclusion awareness
Examine the warranty contract for potential exclusions that may be applicable. Common exclusions include pre-existing conditions, cosmetic issues, and optional appliances or systems.
Conclusion
Home warranties often prove to be a great benefit to both sellers and buyers of real estate, and we hope that with our extensive guide on home warranties, you are well prepared to claim a suitable one for your real estate!
