If you’re selling a home, you might want a home warranty to help incentivize potential buyers. A home warranty plan covers the repair and replacement of major appliances and systems. What exactly will a home warranty cost you as a seller, though?
We at the This Old House Reviews Team have researched the best home warranties in the country. Our process has included listening to customer service calls, interviewing experts in the industry, and conducting thorough analyses of customer reviews. Read this guide to learn how a seller’s home warranty helps make the home selling process easier on you and everyone else involved.
What is a Home Warranty Plan?
First, you need to understand what a home warranty is and how it is different from home insurance. A home warranty is a service contract between you and a provider that covers repair costs on selected items in and around your home.
Home warranties cover malfunctions due to general wear and tear, but it does not cover any damage or malfunction due to neglect, misuse, or environmental hazards. The main difference between a home warranty and home insurance is that home warranties do not cover natural disasters, theft, and vandalism, while home insurance policies do cover them.
What is a Seller’s Home Warranty?
A home seller may purchase a seller’s home warranty plan for financial protection in the instance of major appliances or systems. For example, if the refrigerator or HVAC system breaks down while your home is still under contract, it would receive repair or replacement promptly. In addition, many home warranty companies offer sellers’ warranties for free as long as the seller agrees to purchase a home warranty plan for the buyer once the home is closed.
Why is a Home Warranty Good for a Seller?
Sellers’ warranties are a popular service to help with the home selling process for various reasons. First, if something goes wrong with the home’s systems or appliances, you maintain peace of mind. Plus, if a homebuyer knows they will receive a home warranty upon purchase, they are more incentivized to purchase the home.
Reasons a seller might want to purchase a home warranty include:
- To maintain the property “as is” until the home reaches closing
- To maintain peace of mind if a covered appliance or system breaks down while the home is listed or under contract
- To further incentivize buyers to purchase the home
What Does a Home Warranty Cost a Seller?
Many home warranty companies include a seller’s warranty for free as long as you have a signed agreement to purchase a home warranty plan for the buyer once closed. You should expect to pay somewhere around $300–$600 for a seller’s warranty without this option.
If you agree to purchase a home warranty plan for the buyer, the average cost ranges from $39–$63 per month.* You may also pay for a home warranty plan annually, averaging around $400–$700.
*Price is averaged based on quotes for a 2,000 square-foot single-family home in Raleigh, NC.
How to Get a Home Warranty
If you have decided that a home warranty is worth it, there are some crucial steps to take when considering the best possible warranty for you. Below are some significant factors to weigh and steps to take:
- Mention it to your agent—Before moving forward with purchasing a seller’s warranty, check with your real estate agent for suggestions and insights. Your real estate agent can help make the process of obtaining and applying a home warranty plan to the selling process more streamlined and straightforward.
- Determine the type of plan you want—Some providers organize their plans based on the number of items covered under each plan, while others divide coverage by the type of items, such as systems or appliances. Take note of the items you have in your home and weigh your coverage options before buying a plan.
- Look at coverage caps—Sometimes, a home warranty company places coverage caps on certain appliances or systems. This amount typically covers the amount for repair but is often not enough for an entire replacement. For example, if there’s a $2,000 coverage cap on your ductwork, you are responsible for paying any amount past $2,000. So having a higher coverage cap might be helpful to have while the house is still under contract.
- Think about pricing—If you’re on a budget, there are plans below $50 a month that will suit your needs. If you cannot pay a hefty upfront fee, some providers let you receive a seller’s warranty for free as long as some of the closing costs go towards the home buyers receiving a new buyer’s warranty. Many companies also let you pay monthly to make their plans slightly more affordable.
- Consider customer service—Customer service is crucial to home warranties. If an item or system breaks down, you’ll want a responsive and helpful customer service team to help you get it fixed. The best home warranty companies offer 24/7 customer service, and they also have an online portal or app where you can easily file claims.
- Research the company’s reputation—When searching for a provider, look for one that has at least a B rating from the Better Business Bureau (BBB). Read other third-party customer reviews, such as Yelp and Google Reviews, to get a good idea of what it’s like to work with that home warranty company. Your real estate agent may also have a working relationship with a home warranty provider.
Recommended Home Warranty Companies
Consider the following companies if you’re ready to buy a seller’s warranty. We recommend getting a quote from both providers. This way, you can closely compare your options and negotiate better deals.
- American Home Shield: With more than 45 years of experience, American Home Shield (AHS) is one of the most trusted companies in the industry and our top pick. It offers its AHS® Seller Coverage Option, ShieldEssential, with a $2,000 cap for all trades during the listing period. In addition, AHS provides flexibility in the selling process, as no money is due until the home closes.
- Select Home Warranty: Select Home Warranty provides unique offerings and low premiums on its home warranty plans. These unique offerings include free roof coverage, seasonal promotions, and distinct systems & appliances plans. These perks strive to help make your home’s price 3% higher on average. Select is not available in Nevada, New Mexico, Washington, and Wyoming.
Our Rating Methodology
The This Old House Reviews Team is committed to providing comprehensive and unbiased reviews to our readers, and we aim to provide transparency in our review standards and research process.
Our research process includes speaking with representatives from more than 40 home warranty providers, requesting quotes, and asking clarifying questions to gain insight into each provider’s benefits and downsides. We also analyze sample contracts from each company to understand specific coverage terms.
To rate companies, we apply the data we have gathered to our review standards. These standards are on a 100-point scoring system, which is detailed below:
- Coverage (35 points): Providers are scored based on breadth and depth of coverage. We focused on key home systems (HVAC, plumbing, and electrical), essential appliances (refrigerator, ovens, and laundry machines), and unique coverage items (such as roof-leak coverage and code violation allowances). Coverage scores are weighted by taking into account coverage caps and other limiting factors, meaning providers with greater range of coverage and higher coverage caps score the highest.
- Value (30 points): A company’s plan value is a reflection of how well it serves the customer in comparison to what the customer pays for the policy. We accounted for monthly costs, service call fees, and cost flexibility (such as customizable service call fees, discounts, and multi-year policies).
- Trustworthiness and Transparency (21 points): Trustworthiness and transparency are a reflection of how well the provider considers the customer’s interests. We scored items such as the length of workmanship guarantees, online availability of a sample contract, policy change flexibility, and ease of cancellation. Additionally, we scored items that reflect industry reputation and customer satisfaction, including analyzing brand reputation across the Better Business Bureau and third-party customer review aggregators.
- Availability and Service (14 points): Quality of customer service is key to customer satisfaction. We dug into each provider’s guaranteed response times, claims processes, service flexibility, emergency availability, and more.
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