Understanding Home Warranties: What Buyers and Sellers Need to Know

Buying or selling a home can be a significant financial investment, and unexpected repairs can create stress and frustration for both parties. One way to mitigate these concerns is through a home warranty, a service contract designed to cover the repair or replacement of major home systems and appliances that fail due to normal wear and tear.

Although Florida law does not require sellers to disclose known property defects in writing, many REALTORS encourage sellers to complete a Property Disclosure Statement to provide transparency. However, even with full disclosure, problems can still arise after closing. In such cases, a home warranty can offer peace of mind to both buyers and sellers, reducing the likelihood of post-sale disputes.

What is a Home Warranty?

A home warranty is a one-year service contract that covers the repair or replacement of major home systems and built-in appliances. Unlike homeowner’s insurance, which protects against unexpected events like fire, theft, or natural disasters, a home warranty specifically covers breakdowns caused by normal use over time.

What Does a Home Warranty Cover?

Most standard home warranty policies include coverage for:

• Heating and cooling systems (HVAC, furnaces, air conditioners)
• Electrical and plumbing systems
• Built-in kitchen appliances (dishwashers, ovens, garbage disposals)
• Water heaters
• Garage door openers

What is NOT Covered?

• Cosmetic issues (peeling paint, broken tiles)
• Structural components (walls, roof, foundation)
• Pre-existing conditions known before purchasing the warranty
• Routine maintenance (changing air filters, unclogging drains)

Understanding what is included in your policy is essential—coverage varies by company and plan, so reading the fine print is crucial.

Who Pays for a Home Warranty?

A home warranty can be purchased by either the buyer or the seller.

• Sellers often provide a home warranty as an incentive to attract buyers and increase confidence in the home’s condition.
• Buyers may choose to purchase a home warranty to protect themselves from unexpected repair costs after moving in.

The cost of a home warranty typically ranges from $300 to $500 for a one-year plan, with service call fees ranging from $50 to $100 per repair visit.

Benefits of a Home Warranty for Buyers and Sellers

For Buyers

• Reduces financial risk by covering unexpected repairs on major systems.
• Provides reassurance when purchasing an older home with aging appliances.
• Simplifies repair process by providing access to pre-approved service providers.

For Sellers

• Makes the home more appealing to buyers by offering added protection.
• Reduces the risk of post-sale disputes over system failures.
• Can lead to faster sales and smoother negotiations.

Choosing the Right Home Warranty Plan

Not all home warranties offer the same level of coverage. Before purchasing a plan, consider these key factors:

1. Research the Company

• Check online reviews, Better Business Bureau ratings, and ask for recommendations from REALTORS or past customers.
• Verify that the company has a history of reliable service and prompt claim processing.

2. Understand the Coverage Details

• Read the policy carefully to know what is and isn’t covered.
• Determine if there are coverage limits on specific systems or appliances.
• Check for waiting periods before coverage begins.

3. Verify the Service Process

• Confirm how claims are handled and if there are limits on repair costs.
• Make sure the company provides licensed and vetted contractors for repairs.
• Ask whether you can choose your own service technician or if repairs must be done by company-approved vendors.

4. Consider Additional Coverage

• Some policies offer optional add-ons for:
  • Pool and spa equipment
  • Septic systems
  • Roof repairs
  • Well pumps

Home Warranties vs. Home Inspections

While a home warranty offers valuable protection, it should not be considered a replacement for a home inspection.

• A home inspection provides a detailed assessment of the property’s condition before purchase.
• A home warranty covers repairs after closing if systems fail due to regular use.

Buyers should always get a home inspection before purchasing a property to identify any existing issues that a home warranty may not cover.

Is a Home Warranty Worth It?

A home warranty can be a smart investment, but it’s important to understand the terms and limitations before purchasing a plan.

For Buyers:

• A home warranty can help protect against costly repairs, but it should not replace a thorough home inspection.
• If purchasing an older home, a warranty may provide peace of mind in case systems fail shortly after moving in.

For Sellers:

• Offering a home warranty can attract more buyers and help homes sell faster.
• It minimizes the chances of buyers coming back with repair demands after closing.

To make the most informed decision, consult with a REALTOR for guidance on choosing a reputable home warranty company and ensuring you get the best coverage for your needs.