A home warranty is a service contract provided by a third party that covers the normal wear-and-tear of appliances and systems. Below we’ll explain more, including what it covers for both resale and newly constructed homes, and the benefits home warranties provide for both buyers and sellers alike.

Warranties on Resale Homes

After closing and claiming the keys, having a home warranty in place allows buyers to move in with confidence, knowing that their appliances and the other major mechanical tickings of the home are covered. A basic service contract will pay for the repair or replacement of the dishwasher, oven, range, garage door opener, water heater, disposal, wiring, plumbing and HVAC systems. There are numerous licensed providers of Austin home warranties, and we encourage you to shop around or begin your research here.

For Austin homes, the service contract business is regulated by the Texas Real Estate Commission, and regarding who pays for the warranty - buyer or seller – that’s negotiable. However, almost without fail, sellers tend to set a maximum price point of what they’ll pay towards the warranty, and buyers are then free to shop for the one that best fits their coverage needs. The actual warranty excerpt from the TREC contract is below, and the fill-in-the-blank point is where the buyer and seller sit down to agree on a price. 

"H. RESIDENTIAL SERVICE CONTRACTS: Buyer may purchase a residential service contract from a residential service company licensed  by TREC. If Buyer purchases a residential service contract, Seller shall reimburse Buyer at closing for the cost of the residential service contract in an amount not exceeding $____.  Buyer should review any residential service contract for the scope of coverage, exclusions and limitations.  The purchase of a residential service contract is optional. Similar coverage may be purchased from various companies authorized to do business in Texas."

The prices of warranties are contingent on the size of the home, whether it has a pool and whether you add optional items to cover, but costs typically run from $400 to $600. Coverage for optional items that add to the price include refrigerators, well pumps, septic tanks, swimming pool pumps, spas and free-standing appliances such as freezers, washing machines and dryers. Because your home warranty is renewed annually, you can always add items for coverage down the road. 

Warranties on New Construction Homes

When it comes to newly constructed homes, builders typically provide their own warranties. New home contracts generally include one-year coverage for the builder's workmanship and two years for repairs and replacement of failing components such as such as windows, heating, ventilation, doors and trim, air conditioning, electrical systems and plumbing. More often than not, the builder will also offer 10-year coverage for "major structural defects", for example, if a main beam in your living room is threatening to collapse seven years down the road. Some buyers also buy additional coverage from a third party after they review the basic warranty and discover that some home components are not covered by the builder's warranty. 

Home Warranties Benefit Both Buyers and Sellers

For buyers, the benefits of a warranty are realized when an unexpected break down happens in the home. If your AC putters to a stop or your dishwasher dies, a quick call to your warranty provider will have the item repaired or a new one installed. If you're unsure whether an item is covered, check with your warranty provider before arranging for repairs. Instead of out-of-pocket, costly replacements - which you probably won’t appreciate after just buying a home - you’ll only pay a small service fee as stipulated in your warranty agreement.

For sellers, a warranty protects you in the event of something breaking down in the home post close. If the warranty is in place, buyers refer directly to their provider to handle - and most importantly, to pay for - the issue. Some warranty companies also give sellers the option to purchase a home warranty when they list their home. Having this kind of warranty in place protects sellers when potential problems with a covered item are discovered during the home inspection. Your Realtor can help you decide which warranty is right for you during the sale of your home.

When it comes to giving you peace of mind concerning your new purchase, we encourage you to find the right warranty coverage. We'd like to work with you to make sure you're ready for the unexpected and that you're ultimately happy in your new home.