As Negotiations Return to the Housing Market, Buyers Are Asking for Home Warranties
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Thanks to shifts in the housing market, homebuyers once again have some power over sellers — and with power, comes negotiation.
Home sellers are now more likely to agree to buyers' concessions, meaning it may be easier for you to snag a year-long home warranty on the seller's dime.
Home warranties provide coverage for appliances, and they’re often included in real estate deals as they give buyers peace of mind without being a major financial burden on the seller.
Until recently, the housing market was in a period when it was rare for sellers to make concessions — like buying home warranties — because properties were selling fast and it usually wasn’t necessary to add extras. But that's changing, as competition for homes as cooled.
Jay Rinehart, a real estate broker in South Carolina, says seller-paid home warranties have surged in popularity in his market. During the pandemic housing boom, it was almost unheard of for a seller to pay for a home warranty. But now he estimates that 10% to 25% of offers include a provision for a seller-paid home warranty.
Likewise, Alexia Bertsatos, an agent in Phoenix, says she and her clients are asking for a home warranty in almost every transaction, whereas a year ago they had put that request to the side because homes were getting multiple offers and often selling above the asking price.
“We couldn't ask for it because they wouldn't get it from the seller,” she says. “After the market slowdown a year ago, we are back to asking and negotiating with the seller to include the warranty, and most of them do now because we have more negotiating power.”
Why homebuyers ask for home warranties
When buyers have some leverage with the seller, home warranties are one of the most common things they request because they can lessen buyers' worries about appliances. Appliance repairs without a warranty usually cost a few hundred dollars, but problems with expensive systems like air conditioning units can cost thousands to fix.
“It's a new house,” Bertsatos says. “You don't know what is going on with it. Maybe something is working today, but a month later, it may fail.”
Home warranties aren't the only concession you can ask for — covering some closing costs or temporarily buying down your mortgage rate are also common. But warranties can be appealing to new homeowners during the year after their purchase because they're meant to provide some security. After making a down payment, money is often tight and it's not easy to afford a major repair. The pitch with a home warranty that you’ll have coverage during that tight period in case you need to make unexpected repairs on home appliances.
Home warranties can cover things like HVAC systems, washers and dryers, kitchen appliances and water heaters. But whether they're a worthwhile purchase is a much-debated question.
The plans typically cost between $600 and $1,000 for a year, according to Kevin Brasler, executive editor at Consumers’ Checkbook. They also have service fees or deductibles of $75 to $150 that you pay when you need a repair.
Limitations of home warranties
Brasler doesn't recommend that homebuyers try to negotiate for home warranties because the plans only cover certain appliances, often excluding things you might expect them to protect against, like roof leaks. “They’re expensive policies for what they are, for what they cover," he says.
Home warranties have payout maximums — sometimes $2,000 or less for a particular problem — which means they’re probably not going to cover the full cost of major repairs if a heat pump or an air conditioner fails, for example.
The companies that provide home warranties regularly receive consumer complaints alleging they send out low-quality contractors and refuse to pay for repairs that customers think should be covered, Brasler says. Also, the fine print of a home warranty contract often includes carve-outs for appliances that haven’t undergone regular maintenance or are too old.
Instead of asking for a home warranty, Brasler recommends requesting a seller credit in the amount of the cost of a year of the warranty. This credit can go toward repairs if something comes up.
Focusing on securing good inspection contingencies, which offer a window to negotiate repair costs or walk away from a deal after an inspection, is another alternative to asking for a home warranty. If issues with appliances arise during an inspection, you can ask the seller to repair the issue before you move in.
Chad Marzen, professor of business law at Penn State Smeal College of Business, agrees that home warranties have limitations and says it’s important to understand the contracts. But he says they can be a valuable bonus for new homeowners, especially if the home they’re buying has older appliances, so it doesn't hurt to ask for one in the negotiation process.
“From the seller’s perspective, providing a home warranty to the buyer is a very low-cost concession,” Marzen says. “In the context of a much larger real estate transaction, it’s a cost that the seller sometimes will gladly bear.”
Securing a home warranty from the seller
You don't always have to negotiate for home warranties because sellers sometimes advertise plans in their home listings.
In fact, some real estate agents' companies have agreements with home warranty companies in which the real estate agent earns a commission for their inclusion in deals. Agents often recommend the seller purchase one to make the listing more attractive, or the agent’s company may even gift the warranty as part of their services to the seller.
Seller’s warranties also provide coverage for the home during the time when it is on the market and up to closing. Then, the buyer gets the plan when they take ownership.
When the seller doesn't offer a warranty, buyers can try to negotiate for the seller to include one in the deal. Bertsatos says your odds will be higher if the home has been on the market for at least a couple of weeks.
She also recommends negotiating so that the buyer selects the warranty company. That way, you can make sure you’re getting a plan from one of the better companies in the warranty business.
Should the seller resist paying for a warranty, Rinehart says he wouldn't let it be a dealbreaker. If you’re set on having a warranty, you could always pay for it yourself. They're usually less than $1,000 for a year-long plan, so it’s ultimately not worth walking away from a good house over this negotiation, he says.
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