Buyers vs. Sellers Home Warranty

Who pays for a home warranty?

“Many sellers will offer a home warranty as a show of good faith (unless their property is still covered under a builders warranty),” explained Sam St. Clair, a real estate agent in Peoria, Arizona. “But a good buyer’s agent will ask for one.”

Sometimes, market conditions influence who pays. Matt Brown, a Naples, Florida-based real estate agent, noted that sellers in buyer’s markets often include warranties as a sales incentive to remain competitive. In sellers’ markets where inventory is tight, sellers hold more leverage and may skip the warranty offer altogether.

The cost is negotiable regardless of market conditions, though. Both parties can split the expense during closing negotiations. Or, homebuyers can wait until after closing to buy their own plan from a reputable provider. St. Clair observed that cooperative sellers who prioritize buyer peace of mind tend to make transactions smoother.

Pro tip

Don’t wait until the final walkthrough to discuss home warranty coverage. If you’re buying, include it in your first offer or counteroffer. And if you’re selling, put it in your listing from the start rather than using it as a last-minute sweetener.

» MORE: How to buy and sell a house at the same time

Benefits of a home warranty for sellers

According to Brown, offering a home warranty gives sellers several benefits:

• It eases buyer concerns about inheriting older HVAC systems, water heaters and appliances.
• It makes your listing stand out when competing against similar homes.
• It prevents buyers from requesting price cuts after inspections reveal issues.
• It covers repair costs if systems break down while your home is on the market.
• It reduces disputes over appliances or systems that fail after closing.

Real-world example

St. Clair illustrated why the investment pays off with a common scenario:

You’re selling a 15-year-old home with an original air conditioner that works fine. But prospective buyers are nervous about future replacement costs. You don’t want to replace a working unit you won’t enjoy, and the replacement cost won’t increase the home’s sale price.

“In this case, the $500 to $1,000 investment for a one-year home warranty is money well spent,” he explained. “It provides ‘bumper-to-bumper’ coverage on the rest of the home for the buyer.”

Benefits of a home warranty for buyers

Home warranties are especially valuable for older homes with aging appliances and systems. Once the deal closes and ownership transfers, buyers gain these advantages from coverage:

• Protection against costly repairs for major systems, such as HVAC, plumbing and electrical
• Simple repair process with prescreened contractors
• Budget predictability through fixed annual costs and service fees
• Peace of mind for first-time buyers navigating homeownership expenses

Real-world example

Melissa Dierks, also a real estate agent in Peoria, experienced this protection firsthand.

Her air conditioner broke on a 120-degree summer day, and repairs would’ve set her back over $1,000. “With a home warranty, the homeowner typically pays only a service fee, while the warranty company covers the rest,” she explained. “Instead of paying $1,400, I paid only $75.”

The value multiplies when more than one system fails within the same year. For example, a faulty water heater in winter followed by a broken AC in summer could cost $5,000 or more out of pocket. A reliable home warranty keeps emergency funds available for true crises, such as job loss or medical expenses.

How much does a home warranty cost?

“Warranties run $50 to $75 per month and generally have service fees of $100 to $150,” said St. Clair. “Like most insurance products, they can feel like a waste of money when you don’t need them. When you do, though, you can easily save a year’s worth of warranty payments from a single repair.”

Several factors influence your total home warranty cost:

• Coverage level: Appliance-only plans cost less than comprehensive coverage that includes HVAC and plumbing systems.
• Add-ons: Pools, spas, well pumps and septic systems increase your annual premium because they require specialized maintenance.
• Property type: Larger homes have more systems and appliances to cover, while older homes face a higher risk of breakdowns from aging equipment.
• Location: Areas with higher labor costs or extreme weather conditions usually have higher premiums.
• Deductible options: Some plans let you choose higher service fees in exchange for lower annual premiums.

Cost aside, “buyers need to know what is and isn’t covered, and be familiar with the warranty provider’s claims handling process,” St. Clair explained. His warranty company denied a claim after he called an out-of-network plumber for a burst pipe. So, he was on the hook for the bill.

Is a home warranty worth it?

“A home warranty is especially valuable for first-time buyers who may not be prepared for large bills and for owners of older homes with aging systems,” said Dierks. The coverage provides confidence that major systems won’t drain savings right after closing.

Still, warranties come with limitations worth considering:

• Coverage exclusions: Preexisting conditions, poor maintenance and improper installation aren’t covered.
• Claim denials: Home warranty companies can reject claims based on contract technicalities, vague language or a lack of maintenance records.
• Network restrictions: Many home warranty providers require you to use preapproved contractors, which may result in longer wait times.
• Coverage caps: Many plans limit payouts for certain repairs, leaving you with partial fixes.

“Evaluating the quality of customer service and the speed at which they handle claims is crucial,” Dierks noted. Look for companies with strong reputations and local representatives who make communication easier.

Ultimately, whether a home warranty is “worth it” depends on your home’s condition, financial situation and risk tolerance. Buyers with newer systems and healthy savings might skip the warranty. But those inheriting aging equipment with limited savings often find the protection worthwhile.

What to ask yourself

Create a quick home inventory before deciding on a warranty. List the age of your HVAC system, water heater, major appliances and electrical panel.

Are three or more items over 10 years old? A warranty is likely a wise investment.

Is everything under five years old? You can probably buy or sell your house without a warranty plan.