I can give several examples when buying a third party home warranty wasn't needed in the first year the buyer owned the home and they wondered if the money paid by them or the seller in the offer negotiations was a waste. But I have more examples however where I am notified by the warranty company as the buyer's Realtor that a claim was made by the buyer for a repair and the issue was taken care of or replaced.

More often than not a Home Warranty is worth the relatively small investment.

Negotiating a home warranty in the offer to purchase a home is common place in our Cedar Rapids market, especially for first time home buyers.  Having an unexpected problem with the water heater or furnace as an example could be a big financial burden the first year of owning the home.   Having a home warranty for a year after closing can create peace of mind knowing the deductible (usually around $75-$100) is much less than the repair or replacement cost. 

In a recent negotiation where I was the buyer's Realtor, the home was in the perfect location for the buyer, was clean and in move-in condition, and priced within their budget.  The only concern, the big concern was that the furnace, central air, and water heater were all past their life expectancy.  The seller was not willing to credit or give an allowance for the replacement of these mechanicals in the negotiations.  The buyer was concerned -even fearful - of the potential $6,000 cost of all three failing in the first year of ownership.  This is where the home warranty saved the sale for the buyer and seller.  A 2-year home warranty was negotiated and the seller paid the buyer closing costs.  This successful negotiation netted the seller a fair price and the buyer the peace of knowing there wouldn't be a big financial cost of replacement, only the deductible in the case of failure.  Saving the closing cost funds will also allow replacement when one of the mechanicals needs updated, it is past the 2-year warranty date. 

With manufacture warranties being most likely a year, the home warranty has become a buyer safety tool to avoid additional other costs.  As a listing Realtor, I can recommend the home warranty be purchased at the time of marketing as a buyer incentive and marketing tool. In a few cases I've had sellers make a claim on the home warranty prior to the closing and the concern was repaired or replaced with only the deductible of $75.  In one example, I notified the buyer they were getting a new high efficient water heater because the 16-year old one broke.  Happy buyer, relieved seller. 

There are several companies that offer home warranty policies. Reading the brochures, coverage, initial and deductible cost will help you decide which one meets the price and type of home you are considering selling or buying.

Heather Morris

Broker Associate Skogman Realty