Navigating a real estate transaction in the Las Vegas Valley can be a whirlwind. Between inspections, appraisals, and signing stacks of paperwork, many homeowners and home buyers find themselves asking one specific question: who pays for the home warranty?
In the world of real estate, the answer often depends on the current market conditions and the negotiation skills of your real estate agents. Whether you are buying, selling, or simply exploring your options, understanding how home warranty coverage fits into your closing costs is essential for long-term peace of mind.
What Is a Home Warranty in a Real Estate Transaction?
A home warranty is a service contract that helps cover the cost of repairs or replacements for major home systems and appliances when they break down due to normal wear and tear. This differs from homeowners’ insurance, which typically covers damage from external events such as fire or theft.
While home insurance is a requirement for most mortgages, a home buyer’s warranty is an optional but highly recommended layer of protection against unexpected repairs.
When the Seller Pays: The Power of Seller Incentives
In many traditional real estate deals, the seller pays for the buyer's first year of home warranty coverage. This is often seen as a strategic seller’s home warranty incentive. Here is why a seller might choose to cover the cost of a home warranty:
- Attracting Potential Buyers: Offering a home warranty makes a listing more attractive, especially in a buyer’s market. It signals goodwill and gives the buyer confidence in the transaction.
- Reducing Post-Sale Liability: If a covered item, such as an HVAC system or water heater, fails shortly after closing, the new homeowner calls the home warranty company rather than the seller.
- Peace of Mind: It provides a "hassle-free" transition for both parties, ensuring the home’s appliances and major home systems are protected.
- Marketing Advantage: In a competitive seller’s market, including a premium warranty plan can be the deciding factor that tips a buyer toward one home over another.
When the Buyer Pays: Taking Control of Coverage
There are scenarios where home buyers may choose to purchase their own home warranty plans. This often happens in a hot seller’s market, where sellers are not offering many concessions.
When a buyer pays for their own policy, they can choose the home warranty that best meets their specific needs. They can select from various levels of coverage, from essential plans, enhanced plans, and premium plans, and can add whatever add-ons they want for their new home.
Buying your own plan allows you to ensure specific items are covered, such as:
- Air conditioning unit (a must-have for Vegas summers)
- Kitchen refrigerator
- Washer and dryer
- Electrical systems
- Plumbing systems
- Garbage disposals
- Built-in microwaves
- And More!
How the Cost of a Home Warranty Is Handled at Closing
The cost of a home warranty is typically included in closing costs. If the seller has agreed to pay, the amount is deducted from their proceeds at the end of the real estate transaction. If the buyer is paying, it is added to their total "cash to close" amount.
Most home warranty plans for real estate transactions cover the home for one full year. After the first year, the new homeowner can choose to renew the service contract directly with the home warranty company.
FAQs
Who pays for a home warranty at closing?
The party who pays is determined during the negotiation of the purchase agreement. In many cases, the seller pays for a one-year plan as an incentive for the buyer. However, in a seller’s market, the buyer may choose to pay for the coverage themselves to make their offer more competitive.
What does a home warranty cover?
A typical home warranty covers major home systems, such as HVAC, electrical, and plumbing. It also covers major appliances such as refrigerators, washers, dryers, and garbage disposals. Coverage is specifically for mechanical failures caused by normal wear and tear. It is important to review the contract for specific exclusions and coverage limits.
Are home warranties required in the real estate process?
No, home warranties are not required by law or by mortgage lenders. However, they are highly recommended by real estate agents because they protect both the buyer and the seller from the financial stress of unexpected repairs immediately following a sale.
Why Dwellness Is the Top Choice for Vegas Homeowners
Unlike some national warranty providers, which may frequently deny claims, Dwellness is a local provider that understands the unique needs of Southern Nevada. We have served the Las Vegas community for over 40 years and approve 97 percent of our claims.
When you choose Dwellness, you aren't just getting a home warranty; you are getting a partner. We charge a standard service fee for home warranty work and prioritize getting a technician to your door as quickly as possible.
Protect Your Investment Today
Whether you are a seller looking to provide a value-add or a buyer wanting to protect your new home, Dwellness is here to help. Our plans are designed to give you peace of mind and predictable home services.
Contact Dwellness today for a free quote on our home warranty plans. When something breaks, we'll make sure it gets taken care of fast.