The Realty Times: Home Warranty FAQ

Home warranties are on the rise. Realty Times takes a moment to look at some of the most common questions regarding these products.

What is a home warranty?

A home warranty is a residential service contract giving the homeowner repair and replacement coverage for major operating systems and appliances in a home. These repairs must be due to wear and tear, and not negligence or damage.

How can you benefit from a home warranty?

Repairs to homes are inevitable. And while homeowners cross their fingers in hopes that these repairs are relatively inexpensive, what if an entire system needs replaced, and you are left staring at a bill with a few too many zeros? A home warranty can offer you some level of protection.

Your home warranty plan also provides you with a selected network of professionals from which to choose. Many homeowners prefer having a list to choose from instead of taking a guess at which repair company will be reliable.

According to the Service Contract Industry Council (SCIC), a home warranty, also called a home service contract, offers many benefits to buyers and sellers, including:


  • Repair or replacement coverage of most major appliances and home systems including heating, plumbing, and electrical;
  • Toll-free access to technical support and prequalified repair professionals;
  • Comfort for new owners and protection for sellers while their property is on the market;
  • Optional coverage for structural components such as roofs; recreational equipment such as swimming pools; etc.
  • Ability to transfer the contract from homeowner to buyer.

What are the average costs of a home warranty? MSN Money says you will be looking to spend somewhere from $250 to $600. And then expect to spend from $25 to $75 for each service visit.

What isn't covered?

According to The Home Warranty Review, you should make sure you get any repairs approved by your warranty company prior to calling a repair company. This will help to ensure you are reimbursed. Keep in mind that pre-existing conditions, improperly installed or mismatched equipment, and poorly maintained systems are not usually covered.

Warranties also do not cover "acts of God." This means the pet damage, the graffiti, and the lightning strike are your own responsibility.

Keep in mind, as well, that items "outside the perimeter" of your home may also be off limits. The Review writes, "Some people are surprised to learn that the plumbing leak in the yard is not covered."

How have home warranty changed in our current economy?

According to the SCIC director, Timonty Meenan, there was a "significant increase in home warranty contract renewals in 2009. Existing homeowners fueled the increase over the previous year, while sales by real estate professionals to home sellers and buyers held nearly steady."

Florida broker/owner Ed Smith of RE/MAX Coastal Properties has seen a jump in home warranties sales over the past five years, noting, "buyers and sellers have come to understand the benefits of home warranties and there are plenty of customer testimonials demonstrating their value. It's both a good marketing tool for selling and good protection policy for buyers and sellers."

How do I choose a company?

MSN Money reporter, Liz Pulliam Westom, gives you three helpful tips.


  • Find out which government agency, if any, regulates home warranty companies in your state and check its complaint records.
  • If regulation is loose or nonexistent, pick a company that has a long track history in your state and solid financials. (If the company is public, you can ask for an annual report to see if its home warranty operations are making a profit.)
  • If someone else -- the home seller or a real estate agent -- is paying for the policy, insist that the warranty premium be paid in full for the term of the agreement before the sale closes. Check to be sure the amount is listed on the final escrow statement.

A final tip for anyone considering a home warranty, is to read carefully. A warranty is a contractual agreement, and like all contracts, you should know what you are signing. Warranties can vary in price and coverage depending on the company you choose, so be sure to shop around before signing on the dotted line.