Choosing the Right Home Warranty Plan

Real Estate Agent with E*Rae Real Estate Group- Powered by eXp Realty LLC 651873
When you put an offer in on a home, one of the negotiable items in the contract is a residential service contract, more commonly known as a home warranty.  It’s quite typical for the buyer to request that the seller contribute a certain amount of money towards the buyer’s home warranty purchase.  Why you should request a home warranty, how much money you should request towards a home warranty, and how to choose the right home warranty are all questions worth asking when you are purchasing a new home.
Why should you get a home warranty?  
A home warranty reduces the costs of home repairs by providing an insurance policy of sorts on the maintenance of your home.  If an appliance breaks, you will pay a service fee for the repair which is much less than the actual repair cost.  There are really only a few situations when I will not recommend my client get a home warranty.  If the home is a fixer upper or tear down, it doesn’t make sense to purchase a home warranty. New construction homes sometimes come with builder’s warranties.  It’s a better use of my client’s funds to hold off on the home warranty if the builder’s warranties are as good or better than those offered by a home warranty company.   If you know it’s a multiple offer situation, you may not want to request a home warranty.  The home warranty weakens the offer by requesting an added expense for the seller.  Otherwise, I will advise my clients to request money towards a home warranty.  My job is to protect my client’s best interests so I will usually write in that the seller will pay a certain amount towards my client’s home warranty.  If the sellers don’t like this part of the contract, they can always make a counter offer, but the initial offer is going to be skewed towards my clients’ best interests.  
How much does a home warranty cost?
Since you have to put a monetary amount that the seller will contribute towards the buyer’s home warranty in the contract, it’s a good idea to have a rough idea of home warranty costs before you submit an offer.  Home warranty costs vary significantly based on the type of home you are purchasing; a condo home warranty will cost less than a home warranty for a duplex with double the number of appliances as a single family home.  The average amount I recommend in the contract is $500, this will cover an extensive condo plan with extra money for added coverages, and it will cover a mid-level policy for a single family home.  Once we are under-contract on the home, I send my clients brochures from a few different companies so they can choose the policy that’s best for them.
Which home warranty should I choose?

Choosing a home warranty policy is challenging.  You need to determine what coverages are most important to you, compare annual costs as well as service fees, and take a look at the fine print to really determine which one’s the best.  There are a number of different home warranty companies out there, and they all have multiple products to choose from.  Usually they will have 3 service tiers, a basic plan, a mid-level plan, and the ultimate plan. did a great assessment of the options available for consumers looking to purchase a home warranty.  In their article, they point out some great tips for finding the best home warranty company for you, and they also made a key conclusion that rates may be negotiable.  Calling the home warranty company directly can often lead to obtaining the best rate. 
If you’re planning to purchase a home soon, it’s a good idea to understand the different home warranty options available to you.  Contact me today, and I can send you brochures for a variety of home warranty providers in the Austin area.  
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Joan Cox
Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Erika, great post on home warranties and can be so helpful with older homes and first time buyers.

Mar 03, 2018 02:09 PM #1
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Erika excellent explanation of a Home Warranty Plan, and when to or not request one

Mar 03, 2018 02:24 PM #2
Francisco Peot

Great article on Home warranties. One thing I do want to point out is, warranty coverages are important, but so are the service providers for the warranty companies. Researching the service providers may be more than the average buyer is willing to do. What I do suggest is asking who their service providers are, and research them before they dispatch one. Some service providers for warranty companies can be unreliable and tend to send their less experienced tech’s on the warranty calls. Richmond Home

Mar 03, 2018 04:37 PM #3
Ellen Caruso
Daniel Gale Sotheby's International Realty - Glen Head, NY

Good information on the differences, sometimes people hear warranties and think everything is covered not realizing what’s actually covered.

Mar 03, 2018 06:08 PM #4
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Great information, Erika Rae Albert, Austin Real Estate Expert. I appreciate the comment about checking service providers, too.

I generally recommend sellers purchase the home warranty as it protects them as well It's one less thing to worry about during the listing period and a nice 'gift' to the buyers.

Thanks for sharing,

Mar 04, 2018 07:59 AM #5
Lesley Wilson-VanGoethem
Innovative Realty Solutions Group - Winter Springs, FL
Residential Real Estate Broker Associate

I always tell my buyers that they need to get a home warranty for at least the first year, gives them breathing room.. and then explain we will ask the sellers to contribute to it, but to be prepared that in this tight market , they may decline that option.
But you never know unless you ask!

Mar 04, 2018 08:13 AM #6
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
Truth, Excellence and a Good Deal

There's no such thing as a free lunch.

If one thinks that having one of these plans is going to be better and cheaper than just paying for repairs themselves, they are kidding themselves.  

When your AC goes out in the middle of a heatwave, you are going to be last on the list for getting help.  

Everyone thinks they are going to be the one who gets the free air conditioner.  Show me how that's possible.  On average, the most you are going to get back is a fraction of your annual premium.  Someone has to pay for all of the costs involved in marketing and providing the warranties.

I think you have a better return on investment by playing the instant lottery tickets.  



Mar 04, 2018 10:00 AM #7
Erika Rae Albert, Austin Real Estate Expert
E*Rae Real Estate Group- Powered by eXp Realty LLC - Austin, TX
Exceeding Expectations in Every Transaction

Hi Tim, I understand your concerns.  However, as I mentioned in my post, this is something I suggest my clients ask the seller to pay for in the offer.  Sellers are used to seeing this in a contract, and if they accept this aspect of the contract it is in a way a "free lunch" for my clients.  Oftentimes, my clients will use it immediately for rekey services.  Rekey services usually cost $100, and they can pay a $50 service free for the rekeying through the home warranty company and right away see savings.

Mar 04, 2018 11:14 AM #8
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

Great information! Offering a home warranty can be a great way to bridge the gap on deals that are close but not quite there. We have utilized them in many situations. Thank you so much for the post.

Mar 05, 2018 05:30 AM #9
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Erika, Great feature and excellent blog and great way of explaining it.  Keep up the great writing.


Mar 05, 2018 07:01 AM #10
Faye Y. Taylor
StepStone Realty, LLC - Floresville, TX
Homes for Sale Floresville, La Vernia & San Antoni

Great and informative article.  While the home warranties aren't always great I have had clients who used them with both bad and good results.  But as the buyer is getting one they always have the option of using it vs spending their own money for repairs.   Had one buyer whose A/C went out the day after they moved into the home.  Another agent had a client whose well went out shortly after they moved in.  They were happy with their home warranty coverage after those incidents. So I always suggest them and send papework for the buyer to research which company they want. 

Mar 05, 2018 03:13 PM #11
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Hi Erika:

Here in my area it's common for buyers to request a home warranty for 1 year from the seller and to select the services. The costs really can vary, say if you have AC or a swimming pool, and by warranty company. They also tend to vary in terms of service and the quality of the techs.


Mar 05, 2018 05:46 PM #12
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

Interesting that the home warranty is actually part of your purchase contract.  We don't have any language like that and I seldom hear of buyers who want to get a home warranty over here.

Mar 05, 2018 08:05 PM #13
Amanda S. Davidson
Amanda Davidson Real Estate Group - Alexandria, VA
Alexandria Virginia Homes For Sale

Erika, great advice in your post, congratulations on your feature! We see home warranties a lot here and buyers like the peace of mind it gives them. I like that you point out comparing companies is a good idea. 

Mar 06, 2018 05:09 AM #14
Teri Pacitto
Compass - Westlake Village, CA
Real Estate, Your Style...Your Home...My Specialty

I commend you on your post and you have great points and the important thing is that you discuss this option with your clients ups front.  Since HPP’s vary greatly as well as vendor services and timing the HPP is not always the best reliance in case of an emergency.  In that situation I have explained to my clients to reach out to the HPP and tell them they can’t get that immediate service and often they will allow them to hire their own contractor and submit for reimbursement.  I always explain this process as well.

All states and areas differ so what the rules are in one area may not apply in another. Explaining this and finding out helps establish an after sale relationship as well.

Ending note....I’m not a huge fan of HPP’s and explain the pros and cons of them to our buyers so the expectations are set up.  It is however a standard seller paid item in many situations.  


Mar 06, 2018 06:42 AM #15
John Wiley
Right Move Real Estate Group- EXP Realty - Fort Myers, FL
Lee County, FL Real Estate GRI, SRES,GREEN,PSA

Erika Rae Albert, Austin Real Estate Expert thank you for a great explanation of the Home Warranty.

Like so many things, there are times to ask for it and there are times it is not needed, as you explained.

Best wishes

Mar 06, 2018 08:20 AM #16
Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Erika,

Home warranties are great for nervous or novice home buyers. I never thought, I would have to tell people that they should check the lightbulb, if a lamp is not working, because I had a couple of people, who called their home warranty about this. $100 is a lot of money for a new light bulb, but probably also a lasting lesson in independence.

Mar 06, 2018 02:17 PM #18
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Specializing in Brookside, Waldo, Prairie Village

There is so much fine print with the various warranties--hard to get through. Some of them seem very service oriented and some seem to deny many claims. I've had one company deny the request for renewel b/c clients had 'too many' claims.

Mar 07, 2018 07:45 AM #19
Anne Corbin

I shared your blog on my professional Facebook page, giving you credit, of course! Great post and maybe it will help you find a new client who may be moving from Virginia to Texas!

Mar 12, 2018 10:29 AM #20
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Erika Rae Albert, Austin Real Estate Expert

Exceeding Expectations in Every Transaction
Considering buying or selling in the Austin area?
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