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Sellers: You Need a Home Warranty (and It Might Not Cost You a Dime)

First let me say that I am a born skeptic, and I am frugal. I NEVER buy the extended warranty when I buy a new appliance or other major purchase. In my mind I think that extended warranties are a scam and I would like to assume that the product that I am buying is well enough made that it should last for 3 years or so without me needing an expensive service call or a warranty to pay for the service call. Heck, I have a refrigerator in my basement that I think is about 15 years old and it runs just fine.

So, for me to state that sellers should have a home warranty seems a bit hypocritical. Yet I always offer them to my seller clients and I suggest that I place an order right when I take the listing. In my opinion, there really is no reason for a seller not to have a warranty. First of all, the warranty is free until closing. If its not negotiated in to the contract, you never pay for it. Second, the seller is covered for lots of things during the listing period, even without purchasing the warranty, and the all the seller pays is the deductible for the service call. Not bad, huh?

And just so nobody thinks I am trying to scam the warranty company, our sales rep from the company is the one who sold me on this whole concept.

Last month we had a seller of a newer condo in Birmingham, Michigan whose stove stopped working the week that her condo went under contract. She was faced with getting the stove fixed or replacing it before close. Fortunately for her, we had ordered the warranty so she paid about $60 to have her stove fixed. Not bad. And if the problem had been worse, that would have been covered too.

On the other hand, I had a seller a year ago who told me he didn't want me to order the warranty because his home was in pristine shape. The hot water heater died shortly in to the listing period. He got to pay for a new one on his own. Oh well. I tried.

The warranty can also help if there are negotiations after a home inspection. We sold a home last winter with some older appliances in it, and the buyers were comforted by knowing that a home warranty would take care of any breakdowns in their first year.

The verdict: a warranty warrants serious consideration.

self portrait by Glutnix

Posted by Maureen Francis & Dmitry Koublitsky, SKBK Sotheby's - Metro Detroit on 01/14/2007 04:26 PM

Comments (37)

home warranty, home seller, featured post

Originally posted at: Dmitry & Maureen: Moving Metro Detroit: Sellers: You Need a Home Warranty (and It Might Not Cost You a Dime)

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37 Comments on Sellers: You Need a Home Warranty (and It Might Not Cost You a Dime)

JAN

2007

Maureen, I don't normally suggest a home warranty unless it's an older property, where systems and appliances could be suspect. As a listing agent, it serves to give the home a marketing advantage over ther rest of the homes we're competing against. As a Buyer's agent, it is paid for by the Seller's and protects them after closing. Do you encourage them for every occassion?

Always. The condo with the broken dishwasher was only 2 years old. It's free during the listing period and in my experience it's usually only negotiated in to about 20 percent of the deals I do or something like that.

JAN

2007

Hmmm...I wasn't aware that you could have it in place during the listing period at no cost? Who do you use?

I had never heard about getting it for free during the listing period either. Which company offers that?

I had the seller buy the warranty and a townhouse I bought in Arizona a few years back. Within the first year a got a new central air unit and a new dishwasher for the deductible.

by David Kucic, Hawaii REALTOR

Hawaii Real Estate

I like the warranties also. Even if there appears to be no chance of anything breaking because the appliances appear to be new, you just never know. I find a few properties here in Hawaii that offer a warranty with the home purchase but most of them do not. There are more "sold in AS-IS" condition than there are "Home Warranty Included".

Aloha From Hawaii,

David Kucic, REALTOR

http://www.davidkucic.com

Maureen, you brought up some valid points and great examples. This is the sort of post I hope sellers read and learn from because home warranties - especially in a buyer's market - do help sell homes.

Home Warranties are seldom offered here. Years ago, the insurance industry in Connecticut blocked Home Warranty companies from writing policies. That has changed but the mind set hasn't. Thanks for the reminder that it is a great tool!

I did not know that...Thank you.

I don't know if there are discrepancies state to state but in Nevada I know HSA offers the warranty free during the listing.

You are so right, the warranty can come in real handy. I alway offer it but it is just not popular in this area. However I had buyers from neighboring States where this is the norm.

A few of you asked who we use. First American is our current provider. We were using someone else in the past, and they were fine too, but the office switched companies.

Maureen.... so true. I am a stickler when buying new products and such. I hardly buy the warranty also, especially on a new car. That's always funny. I had a saleman once sit with me for 20 minutes, starting with a warranty that was going to cost me an extra $40 a month or so and I got him all the way down to $18 a month.... and I still said no.... lol

In regards to what you mentioned. A one-time fee of $60, I would do it...by far. That was spent in the first 60 minutes that I was out last night while watching the Eagles game..... ;o)

New iPod and digital camcorder yesterday - no extended warranties purchased. Out here in the great litigious state of California, we never sell a house without one.

We recommend a warranty unless the house is brand new and covered by a builder's warranty - actually, in those cases, we recommend the buyers get a new home warranty which doesn't start until after the builder's warranty expires.

It seems like every closing that I have had, something has come up. I think a home warranty gives some people piece of mind when buying a home. I know they do not cover everything, but its nice to have when an appliance or something like that is fails.

I always buy home warrranties for my sellers and buyers. Last year alone, 5 claims were made against them. My clients LOVED that they were covered. Everything from a hotwater tank to a furnace to a dishwasher died. And all it cost my clients was a $50 deductible.

And while I do not get one with my car (relatives are mechanics) I always get one with large electronic purchases. I have had my laptop replaced and worked on twice all because of my warranty. It was the best $199 I ever spent.

I didn't know about the free listing period. I'll have to check out the details.

I used to have a home warranty on my home. But I was never happy with the service providers that they sent. They also have a lot of exceptions to what is covered. I had an old hot water heater go on me. The warranty covered the heater replacment of $400 but not all the other costs to add the necessary updates to get it to code. The total bill was $1300 and only $400 was paid by the warranty company. I felt that I was ripped off but I wasn't in the position to get a second opinion at that time. I feel that I could have done better by just calling someone in the yellow pages.

I also had a dishwasher problem which took 5 visits before they could fix it.

So as a marketing gimmick, they probably are worth it. As a good deal for the consumer, I'm not too impressed. There's always going to be the anecdotal stories of big savings but those savings are coming from some place. I think they come from people like me who were overcharged for the extras.

I think I can clarify. My company uses AHS and yes, if the seller takes it, they don't pay until closing and they are covered through the listing period and the first year after closing. Maureen, if you offer the home warranty to be paid by the seller and the buyer's agent doesn't put that in the purchase and sale agreement, you and the seller should thank your lucky stars. And the buyer should replace their agent, that is incompetence.

I've never closed on a home without a home warranty. Sure, the service isn't always as speedy as one would like, but here's a list of items that have been covered just in my own personal residences: new furnace, new stove, new clothes dryer, furnace repair (not on the new furnace noted earlier!), pool pump repair, garage door opener repair, multiple clothes washer repairs, dishwasher repairs. With the exception of the furnaces, all of these appliances were less than 6 years old at the time of the repairs.

I've had clients receive new air conditioning units, new furnaces, and lots of appliance repairs.

I would NOT sell a resale home without a One Year Home Warranty. If the seller won't pay for it, I do.

This has been my absolute procedure since 1995. No late night phone calls about the furnace won't start.

No threats about undisclosed defects. It's the best $399 peace of mind in REALTORDOM. And it is a great advertising benefit.

SEE: http://www.homesforsalemdva.com/

Maureen. We use a home warranty as well and it is free for the seller until closing...works well especially with an older home. Thanks for reminding us how it can be used as tool.

Home warranties are part of the actual contract paperwork here. The buyers request the seller to provide them, in some dollar amount, as part of the offer to purchase, and the seller can agree or offer another amount (or there coudl be some other negotiation). I wouldn't go so far as to say they are mandatory but they always seem to be there (I've only been here is CA 18 months so....)

Can you tell us who the warranty company was? I think this a great tip and may give us (agents) an advantage during the listing appointment.

Very interesting loophole with the warranty during the listing period.

I guess I would wonder if it applies to new construction during a listing period? Also, for those of you that sell new homes, do you care if the builder has an insured warranty program?

Steve, its not a loophole. Our rep openly suggested it. Even when they don't get the business on that house, we do give them our other business.

Doug, we use First American.

Other companies offer this too.

Great Realtor, Home Warranty, Stager....Priceless. If only all sellers would follow that pattern

Phyllis Pafumi

Excellent tip Maureen. I wasn't aware that it was free during the listing period also. I always recommend them to my Sellers. Thanks for the tip.

Maureen - Great Information! I was under the impression that once they signed up for the warranty (including the free listing period) that they were obligated to purchase it and provide it to the buyer if the property sold during that listing... I'll need to re-read some of our agreements.

Do you promote the warranty with the house? If so, how is it that it gets negotiated out 80% of the time?

Enquiring minds... great post & topic!

Angus, I do put it on marketing materials, but I don't put it on the MLS listing. If I have a half million dollar home listed I have more than enough to say about it without putting a $365 item in my limited space. I honestly don't think a buyer has ever bought a home because there was a warranty listed on the MLS.

I use a warranty on listings, ask for one for my buyers. IF someone doesn't want one, I get a waiver signed. In the past I've had customers "forget" they were offered one...now I have the docs to refresh the memories!

Hi Maureen,

I'm with you about warranty's on appliances. I 'm a skeptic too. Whenever they try to sell it to me I just say I'll take my chances or I'll buy a new one when it breaks.

Home warranty's are not really big in Manhattan, but I remember a few years ago we listed my parents house with a REALTOR® from GMAC and they insured the house during the listing. It came in handy -All those REALTORS® and buyers roaming through the house someone did break something to the electrical power and what ever needed to be repaired was taken care of.

JAN

2007

We have a couple of companies in Las Vegas that cover the seller for the term of the listing. 99% of the time the buyer is going to ask for it anyways, so it's just one less thing to worry about while we're getting the home sold.

More proof that Home Warranty works. In our area, we had a home sit on the market for 8 months. Even price reductions did not motivate a sale. Within 2 weeks after adding the home warranty, the home sold. Certainly got my attention.

Lisa

I will be listing my home shortly. It's in great shape, but i'll offer a warranty with the home since it's 10 years old and competing with newe

r homes.

I know this is a slightly older post, but I am catching up.

I am not a big fan of home warranties...in some cases they make sense, and obviously if they are free to the buyer, then why not take it, but in my personal experience...

When I bought my home in 2002...it was an older home, and the home inspector warned me that the avacado green, giant hot water heater, that was wrapped in pink panther insulation in my basement was from the 70s and it could go at any time....

A few weeks later I walked into my basement and to my surprise was ankle deep in beatiful brown rusty water.

I immediately called the Home Warranty company and they sent somebody else....

A few hundred dollars later and I was fixed...

It seems my actual new hot water heater was covered, but I had to pay for labor...and the warranty company picked the company. Disposal of the tank was not covered, and neither was all the upgrades it took to bring my pipes and such up to current code. (which had to be done before it could be repaired.)

Still not sure what the point of my warranty actually was???

JAN

2007

Thanks for the post, I found it helpful. I think having a warranty with the home can really help! I'll consider this next time, thanks!

JAN

2007

I had never considered this sort of warranty option, since I was unaware of the fact that your coverage would commence BEFORE the payment... Great marketing idea as well as great coverage for the seller... BRAVO Maureen... Keep those thoughts and letters coming...

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