Understanding Home Warranties for Resale Homes

What Does a Home Warranty Typically Cover?

Coverage depends on the individual contract. Many plans offer some level of repair or replacement coverage for selected major systems and appliances, while upgraded plans may add additional components.

Examples may include:

• Heating and cooling equipment
• Plumbing systems
• Electrical systems
• Water heaters
• Kitchen appliances
• Washers and dryers under some plans
• Garage-door openers
• Additional items included through optional coverage

Do not assume an item is covered simply because the category appears on a marketing sheet. The actual contract determines which components, failures, and repair costs qualify.

Coverage Does Not Mean Every Repair Is Paid in Full

This is one of the most important distinctions for buyers to understand. A covered system may still be subject to exclusions, dollar limits, service charges, maintenance requirements, or restrictions on particular parts or causes of failure.

For example, a plan may cover part of an HVAC repair without covering every component, modification, permit, code upgrade, refrigerant charge, or other expense associated with completing the work.

The right question is not simply, “Does this plan cover the HVAC?” The better question is, “Exactly what HVAC failures, parts, labor, limits, and exclusions does this contract cover?”

Expect a Service-Call Fee

Most home warranty plans require the homeowner to pay a service fee when requesting a covered repair. That amount is generally due even when the technician determines that the problem is excluded from coverage.

Some plans offer different service-fee options, contract levels, or coverage limits. A lower service fee may come with a higher annual contract price, while a lower-priced contract may carry higher out-of-pocket expenses when service is needed.

Compare the complete structure rather than choosing a plan based on the headline price alone.

The Exclusions May Matter More Than the Coverage List

The attractive part of a home warranty brochure is usually the list of items that may be covered. The part buyers should spend just as much time reading is the exclusions section.

A claim may be limited or denied for reasons that can include:

• Pre-existing or known conditions
• Improper installation
• Lack of required maintenance
• Certain modifications or code issues
• Rust, corrosion, sediment, or other excluded conditions
• Specific components excluded from an otherwise covered system
• Repair or replacement costs exceeding contract limits
• Items covered by another manufacturer or builder warranty

The exact exclusions vary by contract. If something is particularly important to you, find it in the written agreement rather than relying on a general description of coverage.

Consider the Age and Condition of the Home’s Systems

A warranty may be more appealing when a resale home has older mechanical systems or appliances that are still functioning but may reasonably require repair during the first year of ownership.

That does not mean every older home needs a warranty or that every newer home does not. Age is only one factor.

Consider the inspection findings, maintenance history, remaining manufacturer coverage, condition of the equipment, replacement cost, your available cash reserves, and the quality of the warranty plan together.

A Home Warranty Does Not Replace the Home Inspection

A warranty should never be used as a reason to reduce your investigation of the property.

The home inspection helps identify the visible condition of systems and components before the purchase. A warranty addresses certain covered failures afterward according to its own contract terms.

If an inspector identifies an aging HVAC system, active plumbing problem, electrical concern, leaking water heater, or appliance failure, the buyer should evaluate that condition during Due Diligence rather than assuming a future warranty company will repair it.

For more information, review our Home Inspection Guide .

Who Chooses the Repair Contractor?

Many home warranty companies require the homeowner to contact the warranty provider first and use a contractor selected or authorized by the company. Calling your own repair company before receiving authorization could affect coverage.

Before purchasing a plan, understand:

• How service requests are submitted
• Whether the company chooses the service provider
• How quickly service is generally dispatched
• Whether emergency service is handled differently
• Whether you can use your own contractor
• Whether prior approval is required
• How disputes or second opinions are handled

Seller-Paid Home Warranties Can Be Negotiated

A buyer may request that the seller provide or contribute toward a home warranty as part of the purchase agreement. Whether that makes sense depends on the property, the offer strategy, market conditions, and the other terms being negotiated.

A seller is not automatically required to provide one, and a buyer does not need to request one simply because home warranties are common in some resale transactions.

Like closing-cost contributions, repairs, price, Due Diligence terms, and other contract provisions, it should be considered as one piece of the complete offer.

New Construction Is Different

Newly built homes often come with one or more forms of builder or manufacturer warranty coverage. Those warranties are different from the separately purchased service contracts commonly marketed as resale home warranties.

Builder warranties may address workmanship, systems, structural components, or other specified items for defined periods. Appliances may also carry manufacturer warranties.

Before purchasing additional coverage on a new home, determine what protections already come with the property so you do not unnecessarily duplicate coverage.

Renewal Can Be Useful, but Review the Terms Again

Some home warranty companies allow homeowners to renew coverage after the initial contract term. That can be useful for owners who prefer predictable service-contract costs as systems and appliances age.

Do not assume that renewal pricing, service fees, coverage, or exclusions will remain unchanged. Review the new contract before renewing and compare the cost with the alternative of maintaining your own repair reserve.