A home warranty plan is form of insurance, a contract promising the repair or replacement of major operating systems and built-in appliances inside a home for one-year after an escrow closes.

Home warranties help avoid disputes between buyer and seller after the sale. The form of Purchase Agreement provided on this site calls for the seller to provide a home warranty policy, although the cost may certainly be shifted to the buyer. In this litigious society it is a solid protection for the seller. If there are problems after the sale the buyer will call the warranty company, not the seller.

Home Warranty Coverage

A typical home warranty protection plan will cover these systems and appliances:

bulletElectrical System
bulletCentral Heating
bulletInterior Plumbing
bulletWater Heater
bulletTrash Compactor
bulletGarbage Disposal
bulletGarage Door Opener
bulletAir Conditioning System (optional)
bulletPool Equipment (optional)
bulletSpa Equipment (optional)
bulletWasher/Dryer (optional)
bulletRefrigerator (optional)
bulletRoof repairs (optional)

What does it Cost?

The premium for the policy is usually paid through the escrow.  The new owner can generally renew the policy after the first year. Several companies offer these home protection plans. The basic policy usually costs around $280. Options cost more.  There is a service call charge of around $50 every time a claim is made. Experience in California is that on average there are almost two calls per contract.  

Shop for a policy. Compare the policies of at least two or three companies, the differences may help you decide which is best for your situation.  Ask these questions:

bulletWhat are the dollar limits for individual items and for the entire warranty?
bulletWhat is the deductible? Is it per call or per item?
bulletWhat is the service charge?
bulletCan the policy be renewed after the first year?
bulletDo only licensed contractors make repairs?
bulletWhat is the warranty on repairs?
bulletWhat is the turnaround time for repairs?
bulletWhich components of the home are not covered?

Another FSBO Selling Point

You are selling the home “as is.” Although you are disclosing any problems you actually know about, you are not making any warranty on the condition of the home. The home warranty policy fills the gap and will give the buyer (and you) peace of mind. So, assuming that you, the seller, are going to pay for it, make this a selling point for the buyer.