What Does a Home Warranty Cost a Seller?

If you’re selling a home, you might want a home warranty to help incentivize potential buyers, who may feel more comfortable if there’s an existing home warranty. A home warranty plan covers the repair and replacement of major appliances and systems. What exactly will a home warranty cost you as a seller, though?

We have researched the best home warranties in the country. Our process has included listening to customer service calls, interviewing experts in the industry, and conducting thorough analyses of customer reviews. Read this guide to learn how a seller’s home warranty helps make the home selling process easier on you and everyone else involved.

What is a Home Warranty Plan?

First, you need to understand what a home warranty is and how it is different from home insurance. A home warranty is a service contract between you and a provider that covers repair costs on selected items in and around your home.

Home warranties cover malfunctions due to general wear and tear, but it does not cover any damage or malfunction due to neglect, misuse, or environmental hazards. The main difference between a home warranty and home insurance is that home warranties do not cover natural disasters, theft, and vandalism, while home insurance policies do cover them.

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What is a Seller’s Home Warranty?

A home seller may purchase a seller’s home warranty plan for financial protection in the instance of major appliances or systems. For example, if the refrigerator or HVAC system breaks down while your home is still under contract, it would receive repair or replacement promptly. In addition, many home warranty companies offer sellers’ warranties for free as long as the seller agrees to purchase a home warranty plan for the buyer once the home is closed.

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Why is a Home Warranty Good for a Seller?

Sellers’ warranties are a popular service to help with the home selling process for various reasons. First, if something goes wrong with the home’s systems or appliances, you maintain peace of mind. Plus, if a homebuyer knows they will receive a home warranty upon purchase, they are more incentivized to purchase the home.

Reasons a seller might want to purchase a home warranty include:

• To maintain the property “as is” until the home reaches closing
• To maintain peace of mind if a covered appliance or system breaks down while the home is listed or under contract
• To further incentivize buyers to purchase the home

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What Does a Home Warranty Cost a Seller?

Many home warranty companies include a seller’s warranty for free as long as you have a signed agreement to purchase a home warranty plan for the buyer once closed. You should expect to pay somewhere around $300–$600 for a seller’s warranty without this option.

If you agree to purchase a home warranty plan for the buyer, the average cost ranges from $39–$63 per month.* You may also pay for a home warranty plan annually, averaging around $400–$700.

*Price is averaged based on quotes for a 2,000 square-foot single-family home in Raleigh, NC.

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How Do You Get a Home Warranty?

If you have decided that a home warranty is worth it, there are some crucial steps to take when considering the best possible warranty for you. Below are some significant factors to weigh and steps to take:

• Mention it to your agent—Before moving forward with purchasing a seller’s warranty, check with your real estate agent for suggestions and insights. Your real estate agent can help make the process of obtaining and applying a home warranty plan to the selling process more streamlined and straightforward.
• Determine the type of plan you want—Some providers organize their plans based on the number of items covered under each plan, while others divide coverage by the type of items, such as systems or appliances. Take note of the items you have in your home and weigh your coverage options before buying a plan.
• Look at coverage caps—Sometimes, a home warranty company places coverage caps on certain appliances or systems. This amount typically covers the amount for repair but is often not enough for an entire replacement. For example, if there’s a $2,000 coverage cap on your ductwork, you are responsible for paying any amount past $2,000. So having a higher coverage cap might be helpful to have while the house is still under contract.
• Think about pricing—If you’re on a budget, there are plans below $50 a month that will suit your needs. If you cannot pay a hefty upfront fee, some providers let you receive a seller’s warranty for free as long as some of the closing costs go towards the home buyers receiving a new buyer’s warranty. Many companies also let you pay monthly to make their plans slightly more affordable.
• Consider customer service—Customer service is crucial to home warranties. If an item or system breaks down, you’ll want a responsive and helpful customer service team to help you get it fixed. The best home warranty companies offer 24/7 customer service, and they also have an online portal or app where you can easily file claims.
• Research the company’s reputation—When searching for a provider, look for one that has at least a B rating from the Better Business Bureau (BBB). Read other third-party customer reviews, such as Yelp and Google Reviews, to get a good idea of what it’s like to work with that home warranty company. Your real estate agent may also have a working relationship with a home warranty provider. Note that they may receive a commission for selling plans, so it’s still important to do your own research.

Recommended Home Warranty Companies

Consider the following companies if you’re ready to buy a seller’s warranty. We recommend getting a quote from both providers. This way, you can closely compare your options and negotiate better deals.

• American Home Shield: With more than 45 years of experience, American Home Shield (AHS) is one of the most trusted companies in the industry and our top pick. It offers ​​its three coverage plans, each with generous system and appliance plans. In addition, AHS provides flexibility in the selling process, as no money is due until the home closes.
• Select Home Warranty: Select Home Warranty provides ​​unique offerings and low premiums on its home warranty plans. These unique offerings include free roof coverage, seasonal promotions, and distinct systems & appliances plans. These perks strive to help make your home’s price 3% higher on average. Select is not available in Nevada, Washington, and Wyoming.

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Summary of the Best Home Warranty Companies

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Our Rating Methodology

We back up our home warranty ratings and recommendations with a detailed rating methodology to score each provider objectively. We conduct research by speaking with company representatives, requesting quotes, analyzing sample contracts, and conducting focus groups and consumer surveys. 

We score each provider against our review standards, which include four comparison categories: coverage, value, trust and transparency, and availability and service. We rate each provider across 31 factors within these categories. Each factor is assigned a point value based on its importance to a homeowner, totaling 100 points. We then convert the final scores to a 5-star rating. 

Here’s a breakdown of our weighted factors:

• Coverage (40%): We scored coverage based on included home systems and appliances, add-on options, and unique benefits. We also compared coverage caps and policy exclusions.
  • Additional coverage items
  • Annual coverage cap
  • Home systems coverage
  • Major appliances coverage
  • Obstructed wall coverage cap

• Value (30%): We compared the coverage level received to monthly pricing to determine plan value. We considered premium pricing, service fees, and flexibility in customizing plan costs.
  • Average monthly cost
  • Cost flexibility
  • Lowest service fee

• Trust and Transparency (16%): We evaluated each company’s reputation using the Better Business Bureau ratings and customer reviews on third-party review sites. We read through plan change policies, workmanship protections, and sample contract availability. 
  • Brand reputation
  • Policy change flexibility
  • Sample contract availability
  • Workmanship guarantee length

• Availability and Service (14%): We award higher scores for faster claim processing and response times. We also considered service technician policies, including options to choose your technician.
  • Claims process
  • Guaranteed response time
  • Service flexibility

To share feedback or ask a question about this article, send a note to our Reviews Team at reviews@thisoldhousereviews.com.