This question comes up all the time. Does it make sense to purchase a home warranty to protect your buyers when they invest in a home or to provide added value when listing a property? Let’s review the benefits, the questions you should ask and how to get started.
Why Buy A Home Warranty?
Benefits to Seller: According to one study, homes with a home warranty sold, on average, for $2,300 more and were on the market for 11 days fewer than the average listing in the markets surveyed. It shows that the sellers are being proactive in caring for their property, which can help reduce buyer anxiety. It’s one less thing to worry about for them. And also, the opportunity to convey home protection to the buyers upon closing can offer comfort and satisfaction to the sellers.
Benefits to Listing Agent: Providing a home warranty to the sellers can give you a competitive advantage. Many home warranty companies offer the Listing Agent the opportunity to provide a home warranty to the sellers free of charge. This could be a term of approximately 6 months and may vary by the different home warranty companies. If the home is not sold during that time, then the Listing agent may be responsible for a small fee.
Presenting the opportunity of a home warranty to the sellers when meeting with them can be a great added value. Providing a home warranty can create extra confidence and trust for the seller who hires you to represent them. It is also a feature that can be advertised in your marketing. What can this mean to the listing agent? More buyers coming to see the home for sale.
Benefits to Buyer: Protection with a single point of contact. There are no guarantees that nothing will go wrong with the purchase, even when a home inspection goes well and no major issues are found. A home warranty provides the buyer with a list of protected services should anything go wrong while the home is under warranty.
Real Estate Agents Can Help Protect Their Buyers and Sellers with a Home Warranty
Real estate agents know that things can go wrong. That’s the way the world works. By taking proactive steps to minimize the risks, such as having your buyers or sellers purchase a home warranty, agents can significantly reduce the stress involved during the transaction process and when the buyers move into their new home.
Many home inspection companies are now offering home warranty programs up to 90 days from closing. They have partnered with home warranty companies to provide this protection. To have longer coverage, you would have to purchase additional coverage with their home warranty partner. This can increase the protection period up to 18 months. The standard home warranty coverage purchased once the buyers close on the property is normally one year. An additional 6 months of coverage can be a big plus.
One home inspection company interviewed offers a roof warranty for 5 years if you use their inspection services and purchase the home warranty through their affiliated partner. Many roof companies that install your new roof don’t warranty it for that long. Look for this feature as it is a big plus!
A recent ad by a large provider states, NEVER PAY FOR COVERED HOME REPAIRS AGAIN. The key word being COVERED. When things break down in a home, it can be very stressful. But what’s more stressful is when you think something is covered and it isn’t.
Important Questions to Ask BEFORE Purchasing a Home Warranty:
- What is covered? Each company differs. Look at the different plans and prices with each company and compare. Some offer many features as part of their basic plan, while others offer them as separate add-on items.
- Does the price of coverage differ based on the square footage of the home? If so, ask for the different rates. Compare them side by side.
- Are pre-existing conditions covered? Many are not, so please ask. Some offer coverage as long as the homeowner was not aware that the problem existed.
- Do I have to use the contractors that work with your company or can I use my own? Sometimes, the benefit of using one of their contractors or inspectors is the added months of protection you get as an incentive. For example, one company said that if you use one of the inspectors in their network when you pay for a 12-month warranty, you get an additional 6 months included as a bonus. That would make the total warranty purchased for 18 months.
- What is the charge per visit? If there are multiple problems, is it one charge or separate charges for each system that is checked?
- Is there a limit on appliances? Some companies will warranty up-to three refrigerators in a home, while others have a limit on appliances.
- Inquire as to whether the warranty covers underground sewer, water lines, (from the outside of the home to the city’s meter) roof leak repair, all mechanical appliances, (no limit on how many) as well as termite coverage to name a few other areas of concern.
- What’s their current license status? Research whether they are affiliated with the Better Business Bureau or another similar consumer protection agency and check their online reviews if any.
Home Warranty, Home Inspection, Homeowners Insurance – Keep it straight for your clients.
For new homeowners, all these terms may be confusing. Be sure to take the time to explain to your clients what each does, what their value is and how they complement each other.
Remind them that most home warranty companies require that a home inspection be performed FIRST by one of their recommended home inspectors. This appears to be a new feature in the home inspection industry and in many cases a welcome one.
Explain to them that a professional home inspection is a visual examination of the current condition of a house. It is not an inspection to verify compliance with current building codes, although they do look at whether the systems and roof being inspected are up to today’s standards. As an example, if the wiring of the home is outdated or the roof is too old, the home may be unable or substantially challenged in obtaining homeowners insurance. Also, a home inspection does not guarantee future condition, efficiency or life expectancy of systems or components.
Remind them also that a home warranty is not a substitute for homeowner’s insurance – they don’t cover the same thing.
Should you get a home warranty for your clients?
For many agents, finding a warranty company that offers the best coverage for your buyer and seller can be an invaluable tool for your business. Now it’s up to you. Is a home warranty worth it? What’s the price for peace of mind? That may answer your question.
Written for Form Simplicity by Janice Zaltman, a Realtor, LEED AP, Marketing Coach and Writer with more than 20 years of experience in the sales, marketing and media fields.