Warranty
Definition and meaning of Warranty in real estate.
A warranty is a legally binding promise or guarantee made by one party to another regarding the condition, quality, or title of a property. In real estate, warranties can cover the physical structure of a home, appliances, or the legal status of the land's ownership.
In more detail
Warranties serve to distribute risk between buyers and sellers. For instance, a home warranty plan purchased during a sale protects the buyer from the cost of repairing older appliances during their first year of ownership. Similarly, a warranty deed guarantees that the seller has clear title to the property and will defend the buyer against future ownership claims.
If a warrantied item or status fails to meet the promised standard, the beneficiary can seek repair, replacement, or legal damages.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Common types | Home warranty, builder warranty, warranty deed |
| Typical duration | One year for appliance warranties, up to ten years for structural builder warranties |
| Beneficiary | The home buyer or current property owner |
A home seller purchases a one-year home warranty for the buyer, which covers the cost of repairing the heating system if it breaks down after the sale.
Frequently asked questions
What is the difference between a home warranty and home insurance?
Home insurance covers damage from unexpected disasters like fires, storms, or theft. A home warranty covers the repair or replacement of systems and appliances that fail due to normal wear and tear.
Does a builder warranty cover everything?
No, builder warranties typically have tiered coverage. Cosmetic defects might be covered for one year, mechanical systems for two years, and major structural defects for up to ten years.
Related terms
Sources & references
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