Homeowners' Warranty
Definition and meaning of Homeowners' Warranty in real estate.
A homeowners' warranty, also known as a home warranty, is a service contract that covers the repair or replacement of major home systems and appliances that fail due to normal wear and tear. Unlike standard homeowners' insurance, which covers damage from accidental events like fires, a warranty covers mechanical failures.
In more detail
These contracts typically run for a period of one year and can be renewed annually by the homeowner. Sellers often purchase a warranty for buyers during a transaction as an incentive, providing reassurance that sudden repair costs will be managed. Covered items usually include heating, ventilation, and air conditioning systems, plumbing, electrical wiring, and large kitchen appliances.
When a system breaks down, the homeowner contacts the warranty provider, who dispatches a contracted technician to assess and fix the issue. The homeowner is typically responsible for a small service call fee per visit, while the warranty company covers the remaining repair costs up to specific limits.
Key facts
| Category | Buying & Selling |
|---|---|
| Typical duration | One year with options to renew |
| Watch out for | Exclusions for pre-existing conditions or improper maintenance |
| Who pays | Often the seller as a buyer incentive |
A home seller purchases a homeowners' warranty for a buyer at closing, which covers the repair of the air conditioning system when it stops working a few months after the sale.
Frequently asked questions
What is the difference between home insurance and a home warranty?
Home insurance covers accidental damage to the home's structure from events like fire or storms, while a home warranty covers the wear and tear of internal systems and appliances.
Do home warranties cover old appliances?
Yes, home warranties typically cover appliances regardless of age, provided they are in good working order when the contract begins and have been properly maintained.