Solved! What Is a Sellers Home Warranty, and Do I Need One?

Usually considered protection for a home buyer, a home warranty for sellers offers benefits to both parties during and after a sale.

By Meghan Wentland | Published Apr 29, 2022 3:51 PM

Sellers home warranty

Photo: depositphotos.com

A: You’re right—most people do think of home warranties as protection for new owners, and home buyers can certainly purchase a warranty for their new home. However, the period between a home being listed for sale and the closing is a very risky period for the sellers financially. Should something go wrong in the home, the sellers have only two choices: repair it, or reduce the price of the home to accommodate the cost of the repair. Once the home price has been listed, any changes to the price will raise questions about why the home is suddenly worth less, and potential buyers may write off the home as an uncertain option—plus the seller may already have put down a deposit on a new home and may not be able to afford the delays caused by figuring out how to finance a major repair. Home warranty insurance for sellers requires the sellers to pay a premium for a period of coverage in exchange for peace of mind and financial security during this time.

A sellers home warranty can provide financial protection while the house is on the market or under contract.

Homeowners know that things can go wrong in a house at any time—usually at the most inconvenient time possible. Placing a house on the market can sometimes seem like an invitation for the pipes to start leaking, the outlet in the kitchen to blow, or the sump pump in the basement to fail. Sellers are often on a tight budget; having completed obvious repairs and maintenance work before listing and strung between buying one home and selling another, cash may be scarce, so a major repair to a sudden plumbing or electrical issue may cost more money than the seller has available. How does a home warranty work for sellers? With a policy in place, the seller can call for repair knowing that they’ll pay only the pre-contracted service charge to get the repair done quickly and well. Without a warranty, the seller may have to delay the repair while they find a way to finance it, missing showings and open houses while the home is awaiting and undergoing repair. If the maintenance problem happens while the home is under contract, a prompt repair can be the difference between shrugging and apologizing for a brief delay and losing the deal completely.

Sellers home warranty

Photo: depositphotos.com

If the buyer’s home inspection finds issues with systems or appliances that require repair, they may be covered by the sellers home warranty.

The home inspection is one of the most stressful parts of buying or selling a house. Even owners who have meticulously maintained their home worry about the unseen problems lurking behind walls, in the dark corners of the basement, and in the soft wood near the gutter. Sometimes an inspector returns an overall clean bill of health, suggesting the replacement of a few outlets or cables, while other reports are the fuel for an extended series of negotiations. What will the seller repair? What will the buyer agree to take on in exchange for a credit on the price? In these cases, sellers home warranty coverage may allow the seller to generously offer to repair problems that fall under the home warranty’s coverage without coughing up a lot of out-of-pocket cash. This places the seller in a strong position; by agreeing to repair the problems that are covered, they may be able to negotiate with the buyer to cover the problems that aren’t included in the policy and save themselves stress and money. It’s likely that the warranty won’t cover everything on the inspector’s list, but knowing that the systems and appliances are likely covered can reduce the stress of the inspection process for the seller and save a significant amount of money.

Home warranty companies may offer the seller free or discounted coverage if they agree to purchase coverage for the home buyer.

As an incentive to sellers to purchase warranty coverage, the best home warranty companies offer coverage at a significant discount (or even for free) during the sale process if the seller makes a yearlong home warranty policy a part of the home sale. These companies allow the warranty to transfer from the seller to the buyer at the closing of the sale, minimizing the home warranty cost to sellers. This is a great opportunity for the seller: They’ll be covered during the sale process and can add a home warranty to their listing as a draw for buyers. What is a home warranty for buyers? If offered a home warranty when buying a house, the buyer will have a yearlong service contract with the warranty company on all of the systems and appliances listed in the p