What is a Home Warranty

There are two types of home warranties commonly in use in real estate transactions:

A home owner’s warranty for new construction and a home owner’s warranty for previously owned homes. Home builders and developers will usually provide a door-to-door warranty for one year for nearly everything in the new home. Manufacturers of the new appliances and mechanical systems in your home have extended warranties as well. The builder may even choose to warranty specific major components of your home (e.g., the roof, fireplace, etc.) for a period of five to 10 years.

Refusal to extend any warranty should be a red flag for home buyers. It may mean that the builder has something to hide. One of the best courses of action for home buyers of new construction is to do a little legwork: Visit a subdivision and knock on doors to ask the new residents how well the builder performed for them. The Better Business Bureau, chambers of commerce or the state attorney general’s office may have information on complaints filed as well. Negotiate for the home warranty right up front and make it a condition of buying the home.

Warranties for previously owned homes have become more popular in recent years, particularly in California, fueled by lawsuits and court cases that place more burden on home sellers to disclose problems.

Home warranties typically cover the furnace, air conditioning, appliances in the kitchen, water heater, trash compactor, electrical system, and interior plumbing. They do not cover pre-existing problems or structural problems such as a leaky roof or a crack in the basement. Most home warranties have deductibles or service fees in the range of $50- $150.