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Home Warranty

Question: I’ve lived in my home for almost 20 years and have made upgrades along the way and now it’s for sale. My agent suggested that I offer a home warranty for the buyer. She said it’s going to cost a couple of hundred dollars and I’m afraid that it might be a waste of money. Do you think this is important to do? Also, won’t the buyer’s homeowners insurance cover any potential problems?

Answer: First, there is a big difference in the two insurance policies. Homeowners insurance combines personal protections, which include losses to a home, its contents, lose of its use, or lose of personal possessions, as well as liability insurance for accidents that may happen at the home. A home warranty is a one-year renewable service contract that covers the repair or replacement of many of the most frequently occurring breakdowns of systems and appliances (subject to exclusions, of course).

Quite often a buyer will ask for a one-year home warranty to be paid for by the seller. It comes in handy for unexpected repairs – and many property purchases come with one. How old is your water heater? It is usually one of the first items to stop working properly after the close of escrow.

A standard home warranty can start as low as $350 for single family homes and condos and go up in price to cover multi-units. It normally covers systems and appliances if they become inoperative caused by wear and tear during the term of the policy, not preexisting conditions. This would include built-in kitchen appliances, heating system, electrical system, plumbing system and drain lines. Extended coverage for nonessentials such as pools and air conditioning can be added for an extra charge. The buyer pays only a service fee for any repairs or replacements.

A home warranty brings peace of mind and a measure of budget security for the buyer who otherwise might not be able to handle expensive repairs. Plus, it eliminates the stress and inconvenience of having to find an approved and insured contractor. A new home owner has a long list of things to do. The ability to make one telephone call to a home warranty company is a real time saver. For you, the seller, it offers a greater level of protection against after sale problems, which will reduce the likelihood of lawsuits.