Does your home insurance policy include things like plumbing or electricity failures? It most likely doesnt. What will you do if something goes wrong in the home after youve successfully closed the deal? Even worse, what if something goes wrong after the buyer has already moved in? You could end up paying thousands of dollars to have the problem fixed.
Dont think that just because ownership of the property has transferred from you to buyer that the buyer wont come to you if there is a major home failure. Imagine if your brand new vehicle malfunctioned within days of its purchase. Would you pay for repairs without word to the dealer? Of course, you wouldnt. Neither will your buyer if there is a problem with the home after closing.
As a for sale by owner home seller, you can benefit from the purchase of a sellers home warranty. Not only will it cover the cost of repair in the case that a major home item fails, it can also make your home look more attractive to buyers. Prospective buyers will be pleased with the assurance that comes from a home warranty.
The last thing you want is to have to have the pressure of dealing with a surprising failure in the home after you have successfully closed the deal. Deciding whether you or the buyer is responsible for paying for the damages could result in a heated debate. Even in the unfortunate event of a home failure, you can avoid this type of situation by purchasing a sellers home warranty.
Essentially, the home warranty picks up where insurance coverage leaves off by paying for failures in items like heating, plumbing, electricity, and air conditioning. Be advised that the warranty only covers these items if they fail on their own. Improper installation or maintenance, code violations, and unordinary wear and tear can lead to a denial of coverage. Even without a home warranty, the buyer could not reasonably ask you to cover damages that were caused by actions taken on their part.
Depending on the provider, sellers home warranty coverage can differ. Make sure you carefully study and completely understand the policy you are purchasing before you pay for it. In some cases, the home warranty might cover different items before and after the closing.
In most cases, the home warranty lasts for a year. Buyers are given the option to renew the warranty coverage when it expires. Be sure to advise your buyer that the cost to renew the policy might end up being more than the initial cost of the policy.
One of the good things about a sellers home warranty is that it can be included as one of the closing costs. You can obtain the warranty and then defer payment until closing, receiving the benefit of the warranty without having to pay for it until later. The benefit of paying for the sellers home warranty yourself is that you have peace of mind knowing the buyer wont have to call you about an unforeseen problem after closing.
Now that the real estate market is cooling somewhat, you'll more likely to find your competitive home sellers offering a seller's warranty. But what exactly is a seller's warranty, and how can it help?
In short, a seller's warranty provides added assurance that any repairs to major appliances, plumbing, and other home systems will be covered by the seller within a specified time period after the home is purchased, excluding a typical deductible of $50-60. Seller's warranties are always offered by builders of new homes, but they're becoming increasingly popular as sales tools for older homes, as well. For the seller, the cost is about $300-400, but it can be well worthwhile, especially if it means a quicker sale of their home.
There are some real estate companies that offer seller's warranties at no cost to their sellers during the home's listing period, such as Home Warranty of America, but the most agencies require their sellers to pay for the warranty if it's something they'd like to offer potential buyers--with the cost often built into the sales price.
Home Buyer's Warranty
A similar home warranty can be purchased by buyers, as well. The typical $300-400 cost is similar to what a seller would pay for similar coverage, and a buyer's warranty covers the same things as a seller's warranty. The main difference is that a buyer's warranty typically begins on the date of closing and continues for a one-year period after that. Another difference: the buyer's warranty can be renewed annually.
Besides Home Warranty of America, there are a number of other companies that offer home warranties for sellers and buyers. Those companies include: 2-10 Warranty, American Millennium (which offers a policy to specifically cover hidden structural or pest damage to a home), and Home Warranty Plans, but you'll probably find others if you do an Internet search or check with your local real estate broker.
As is the case with any consumer product or service, it's always wise to do some research before you decide whether a seller's or buyer's warranty is something you want to consider. Then, if you've decided that such a warranty is worthwhile in your particular situation, make sure to compare the various programs to see which ones are available in your area, what they specifically cover, their overall cost, the amount of their deductible, anything that might be excluded from the program, and any other variables before you commit. Remember, you can offer the warranty, but if you consider an offer less than full price, you can ask the buyers to provide their own warranty.
Providing this service adds to your home's overall appeal to home shoppers. A home warranty gives your home buyers the peace of mind they seek.
Both T J Madigan & Jeanette Joy Fisher are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.