What Does a Home Warranty Cost a Seller? (2024)

By Ross Bentley | December 20, 2023

Single family residence, Menifee, California, USA

All products and services featured are independently selected by our editors. However, when you buy something through our retail links, we may earn an affiliate commission.

A home warranty plan, or a home service contract, covers major appliances and home systems when they break down due to normal wear and tear. When a covered item breaks down, the policyholder files a claim with the service provider and pays a predetermined service call fee. The warranty provider sends a vetted technician to repair or replace the item and covers the cost up to the policy limits.

A home seller can purchase a home warranty to cover issues that arise between the time they list their home and the date of the home sale. A seller’s warranty also covers the home buyer for at least one year after closing, which is an attractive prospect for buyers. In this article, we’ll discuss how home warranties work from a seller’s perspective—including how much a home warranty costs to a seller.


 

What Is a Seller’s Home Warranty?

A seller’s home warranty is a contract that covers the service, repair, or replacement of appliances and systems that break down while a house is on the market. Once the house sells, the warranty transfers to the home buyer. Typically, the seller’s warranty contract includes a year of coverage for the home buyer, though some companies might offer a longer term.

Most home warranties are purchased as part of real estate transactions, with the cost either rolled into the purchase price or deducted from the proceeds. For a seller’s warranty, the seller covers the cost. Many home warranty companies will defer payment for a seller’s warranty until closing, giving the seller a few months of free coverage as they navigate the selling process. This is the case with the Seller Coverage Option available from American Home Shield, for example.

Just as home buyers can ask the seller to cover closing costs, they can also ask the seller to purchase a home warranty. Alternatively, the home buyer can purchase the warranty themselves. In that case, it would be called a buyer’s warranty or simply a homeowner’s warranty. The term “seller’s warranty” denotes that the seller is paying for it.


 

How Much Does a Seller’s Home Warranty Cost?

Because sellers typically fix or disclose existing issues when they list their houses, home warranty companies are often willing to offer them a lower rate. The risk is considered lower, and the provider essentially reaches two new customers simultaneously: the seller and the buyer.

The exact cost of home warranty coverage will depend on a few factors, including the size and location of the home. Different providers offer different rates, discounts, and plans. A plan that only covers home systems, for instance, will cost less than a comprehensive plan that covers both systems and appliances. The seller may also choose to purchase add-on coverage for items that would otherwise be excluded by the warranty, such as a pool or guest unit.

Many providers do not charge the seller until the house sells. In that case, the seller gets a few months of free coverage while the home is on the market and then pays for a year of coverage for the buyer. Assuming the provider defers payment, the seller’s real estate agent can add the warranty cost to their closing costs. This makes it easy for the seller to deduct it from their proceeds rather than paying out of pocket.


 

Does a Seller Need a Home Warranty?

If you have a new home that has been well-maintained, you might not see a need for a home warranty. However, it’s worth considering the perspective of potential home buyers and the current housing market. In a seller’s market, you may have no trouble getting an offer above asking. Buyers may even be willing to waive the typical home inspection contingency to make their offer more appealing. 

When the housing market is oversaturated, buyers feel less pressure and have more bargaining power. They may feel confident submitting an offer below your asking price, insisting that you cover the closing costs, or asking you to purchase a home warranty. In a buyer’s market, offering a home warranty is one way to distinguish your home as a better deal or a safer investment.

A home warranty is especially useful when selling an older home with outdated appliances that are no longer covered by manufacturer’s warranties. Even if you have kept up with the recommended maintenance schedules for all of the appliances and systems in your home, it’s only a matter of time before something needs to be repaired or replaced. A home inspection might even uncover issues that need to be addressed immediately. Having a home warranty in place will protect both you and the buyer.


 

How to Get a Seller’s Home Warranty

If you want to purchase a seller’s warranty, consult your real estate agent. A seasoned realtor should be able to recommend at least one or two reputable home warranty providers based on the experience of past clients. You can also ask friends and family members for referrals.

Next, research the best home warranty companies. Browse online reviews, company websites, sample contracts, and BBB ratings to understand what you can expect from different companies. Before settling on a provider, request quotes from a handful of companies to compare rates and coverage. 

Decide what you are willing to pay and whether you want to purchase systems-only coverage, appliance insurance, or a comprehensive home warranty policy. Make note of exactly what each policy and provider covers, including coverage limits and exclusions.

Once you have identified the right provider and plan for your needs, all that’s left is to sign a contract. If you have any questions about the terms or process, your real estate agent should be able to help.


 

Our Top Home Warranty Company

For most homeowners—including those in the process of selling their homes—American Home Shield (AHS) strikes the right balance between cost and coverage. The company offers a Seller Coverage Option with special rates for real estate transaction customers. This package covers your home during the listing period for up to six months, with a $2,000 cap and the option to renew if your home has not sold.

After closing, AHS transfers coverage to the buyer and gives them 60 days to adjust their plan. Plan options include the following:

What sets AHS apart most are its generous terms. AHS does not exclude items based on their age or maintenance history. It even covers undetectable preexisting conditions, duplicate items, and improper installation. All its repairs come with a 30-day workmanship guarantee, and the company places no cap on its systems coverage.

Learn more: American Home Shield Review

Get a quote: Get your quote from American Home Shield


 

Our Recommendation

A seller’s warranty provides valuable protection for you as the seller. If something breaks down while your home is listed or under contract, the warranty will help cover the cost of repair or replacement. It also benefits the home buyer. Because coverage extends past the closing date, buyers don’t have to worry about how they will pay for unexpected issues in their first year of homeownership.

Costs vary from provider to provider, with home size and location being the primary determining factors. American Home Shield is our top recommendation for a seller’s warranty. However, it’s not the only company that offers this option. We always recommend you shop around before signing to find the right price point and coverage.


 

Seller’s Home Warranty FAQ

Is a home warranty worth it for a seller?

In most cases, purchasing a home warranty is worth it for the seller. The home warranty can save the seller time and money if a covered item breaks down while the house is on the market. It also provides an extra incentive for buyers, which could help the house sell faster. Many home warranty companies even defer the cost of a seller’s warranty. Rather than paying up-front, the seller gets to wrap the cost into their closing costs or deduct it from the sale proceeds. After the sale, the home warranty transfers to the buyers.

Why might sellers want to offer a home warranty to buyers?

Sellers might want to offer a home warranty to buyers as an extra incentive or to provide peace of mind. A buyer might be hesitant to purchase a home with outdated systems and aging appliances, or they might worry about how they will pay for unexpected issues in the wake of a home purchase. A comprehensive home warranty provides peace of mind and financial protection if a covered item breaks down. It also gives the new homeowner access to a network of qualified, prescreened technicians.

What is the difference between a seller’s and a buyer’s warranty?

The biggest difference between a seller’s and a buyer’s warranty is who pays for it. A seller might purchase a home warranty to protect their own interests or at the request of a potential buyer. In either case, if the seller pays, the warranty is a seller’s warranty. A home warranty purchased by the buyer, on the other hand, is referred to as a home buyer’s or homeowner’s warranty. Home buyers can purchase a warranty at the time of the sale or any point thereafter.


 

How We Chose the Top Home Warranty Providers

Our team reviewed and researched dozens of home warranty providers, thoroughly analyzed sample agreements, and identified customer pain points based on analysis of customer reviews and interviews with industry experts. Our in-depth methodology guides our review process to provide transparent information about the companies we review.

During this process, we determined that the most critical aspects of a home warranty company include available service plans and add-ons, depth of coverage, plan cost, industry reputation, customer support infrastructure, and additional features. We also focused on the ability to choose your own contractor, upgrade your coverage package, transfer your plan to another owner, and cover roof leaks, high-end appliance brands, ceiling and exhaust fans, and faucets and fixtures.

Our research supported that plan coverage should carry the most weight, with customer support as the second-most important factor. Industry reputation, plan availability, and additional features were rated equally. We determined that price range, while worth considering, should not be the primary basis for choosing a home warranty provider for your home’s needs.