For years buyers have been told to have a home inspected and obtain a Homeowner Warranty Policy ("HOW"). That way the buyer would know the current condition of the property, and if certain things failed, there was a policy to cover them.

Some realtors use the homeowner warranty to help make the sale (by offering the warranty as part of the listing and sale package), and give the prospective buyers greater confidence that they aren't assuming any big risk with their purchase, much like having an extended warranty on a car. 

What is a Home Warranty: It's not an insurance policy and it's not actually even a warranty on the home. Instead, it's a service contract sold for certain systems within the home such as the heating and plumbing, and also sometimes appliances such as refrigerators and washing machines.

It's not a warranty on a home, in the sense that it doesn't cover the walls, floors, roof or foundation. And it's not like an extension of the product warranty the buyer of a new home receives from the builder, which most definitely would cover those items. In some states, it can't even be called a warranty. For instance, in Oklahoma it may be called "home service agreements" while in Virginia it's "home protection insurance."

Sometimes the coverage extends to the pump and motors installed on pools and spas or to an automatic garage door opener, but in most instances it extends just to what's located within the main foundation of the home. The pipes and wires that deliver water, energy, and telecom services are not covered outside the home, nor is the damage caused by broken pipes, blackouts, or power surges. Those are perils typically covered by a straight insurance policy; the difference between a home warranty and a homeowner's insurance policy comes down to a question of coverage. A home warranty doesn't cover damage due to fire or flood, for instance, and it doesn't cover the roof, walls, floors or foundation.

This is also a difference from the builder's warranty typically issued by a construction company to the buyer of a new home, which would typically cover items such as leaky basements, drafty windows, or warped walls. It's also different from a straight maintenance contract, which typically would be sold to cover routine and scheduled tasks such as the annual cleaning of an oil burner. A home warranty covers only failures due to normal wear and tear.

Inevitably, there will be overlaps in coverage between insurance and warranty, or between warranties. In cases where an appliance is covered by either a manufacturer's product warranty or a retailer's extended warranty. Most HOW's let those take precedence, But some warranties cover only parts after a period of time and not the labor, then the HOW would pick up the labor. Transferable warranties on appliances are less common, but in these situations there also might be an overlap with a home warranty.

If you desire a home warranty, investigate the viability of the issuing company before relying on its warranty. The company should be able to provide you with information regarding its ability to pay claims. Some companies are independent companies dealing in the secondary home market, while others are an extension or affiliate of the builder. There is no guarantee by the government or the REALTOR® assisting you that these companies will be there when you need them. Home warranties cover a limited list of items. Make sure that you understand the extent of the "guarantee" or "warranty" before you sign.There is no shortage of consumer complaints against companies offering such warranties, so it is as usual a "buyer beware" situation.