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Let’s Talk About Home Warranties

This is an odd situation.  Depending on where you buy in the United States, as a consumer, you will see houses are either offered with warranties or not, as a standard operating procedure.  On the West coast, it seems near to impossible to find a house where the seller doesn’t offer this serious value added protection.  On the East coast, this is not so much the case.  We can speculate as to why this is, but suffice it to say as a general rule in Real Estate, new ideas and programs tend to originate on the West coast.  Then, much like weather patterns, as they catch on, they drift toward the East coast. The thing to take note of is especially in our immediate world of 716 land, warranties are offered by lots of very savvy sellers.

I call them “savvy” because if you track houses with warranties, you learn that they typically sell for a higher price. They have a greater chance of selling over a similar house where a warranty is not offered, and frankly, houses that are positioned this way sell significantly faster.  To this last point, we have all heard the expression, “time is money” and in Real Estate, there is a sub-corollary to this that states. “With respect to days on market, when a property sits on the market and doesn’t sell, the elevator only goes down.” So if adding a warranty makes the house sell faster, you guessed it, “keching” the seller got a higher price. Regardless of the out of pocket expense the seller may incur, they invariably come out significantly on the upside when all is said and done. Let me give you something else to think about that really compounds the question on warranties.

When a seller decides to add a warranty to their marketing plan, in virtually all cases they will not pay for it until the transaction closes. Here’s another cool thing about warranties.  But, of course, any discussion about warranties will have to have the all encompassing caveat and familiar phrase we hear about other kinds of insurance and it states, “Certain terms and conditions apply.”   Ok, that’s fair. So let’s say the hot water heater goes on the fritz during the listing period.  As long as it was in proper working order when they “applied” for the warranty, it is a covered item (less a small deductible.) So the seller is going to get the hot water heater either fixed or replaced (and since the transaction hasn’t closed yet, they still haven’t even paid for the warranty.) This can be an incredible benefit to the seller because it will mean that they won’t have to dig into their own pockets to address the problem and the transaction can proceed to closing without any hitches.  Talk about dodging a bullet. Most people get hung up on the benefit to the buyer.  Granted, they will have protection on all of the covered items for a full solid year from the day of closing, and that’s pretty cool too. The only difference here is that someone will have paid for the warranty once it closes.

Ok, so if you just read this, you might be thinking , well why wouldn’t every seller do this and why wouldn’t every buyer insist on the seller providing a warranty?  It’s a great question and it doesn’t have a perfect answer.  Some sellers, I think, are simply being penny wise and pound foolish in this instance or it might just be that perhaps their agent didn’t do the best job explaining it.  The buyer also may not know that they can sometimes negotiate a warranty into the transaction.  In this last case scenario, the buyer can always pay for a warranty themselves and they frequently do.  So let me give you the skinny on this piece of insider information. Not only do buyers decide this is a smart thing to do, but the warranty companies make most of their money on “renewals.”  It seems that once a buyer has the piece of mind knowing that most of their big ticket items will be protected, they do not want to go unprotected after that crucial first year of home ownership. 

I will tell you this if you haven’t gleaned this for yourself. I am a major fan of Home Warranties.  I universally offer them on my own properties when I have put them on the market, and I have many sellers provide them to their buyers in what seems to simply be a very matter of fact part of our marketing package.  So when you talk to your agent, make sure you go over the benefits of a Home Warranty, regardless of whether you are buying or selling.  If you do, I may have to start referring to you as being “savvy” as well.

Hey, I wrote the book on Real Estate, literally.”

Author Brendan J. Cunningham is a New York Licensed Associate Real Estate Broker, lead of the Platinum Team at HusVar Real Estate, as well as an accomplished writer, Shakespearean trained professional actor, and podcaster.

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