Home warranties help homebuyers protect themselves against unexpected problems and appliance repairs. They might also provide some benefit for you in cases where a buyer resolves a problem through the home warranty company rather than bringing a claim against agents from the transaction for issues that occur in the home after the sale.
Chad Wenzelspratt, a Practice Group Lead with Texas REALTORS® risk management partner Pearl Insurance, is a huge advocate for home warranties.
“More than 70% of claims against agents stem from misrepresentation or a failure to disclose,” he explains.
A home warranty changes nothing about your and the seller’s duty to disclose known material defects. Buyers will be basing their purchasing decisions, in part, on what is shared with them from the seller’s disclosure. Even if the seller is fully transparent and has carefully documented every known condition, issues could arise the day after the buyer gets the keys.
“Things break on a house all the time,” Wenzelspratt notes. “Buyers benefit from having a good home warranty in place to take care of it when things happen. If a buyer has that, they’re probably not thinking, I want to blame my agent for selling me a home with a bad furnace or air conditioning.”
Keep in mind that home warranties do not cover pre-existing issues that should have been disclosed or may have been discovered during an inspection. But they offer aggrieved homeowners some help covering unexpected expenses after the sale, which may deter homeowners from seeking relief through a complaint or lawsuit.
“There is no set time to discuss home warranties during the real estate transaction, but it often comes up when the client is requesting home inspections,” Wenzelspratt says.
He recommends educating clients about home warranties and offering a few providers to consider: “Do not offer just one option because it increases your potential exposure if something goes wrong.”
According to Wenzelspratt, it’s a good idea to start building relationships with home warranty providers so you can speak knowledgeably about the types of warranties available in the marketplace.
While it is good practice to let your clients know you encourage a home warranty, do not attempt to explain what the warranty will or will not “cover.” If you are asked those questions, encourage the client to communicate directly with the home warranty company, read the home warranty document, and/or contact an attorney.
“If the buyer declines to purchase a home warranty, get that decision in writing,” he emphasizes. That statement could help you if you are faced with a future complaint or claim. But the statement itself is not a cure-all, since there’s always the possibility a home warranty company wouldn’t cover a particular unforeseen event.
Wenzelspratt sees home warranties as a win-win for buyers and agents. “When spending that much money on something like a home, why wouldn’t you want a warranty?” he says. “You’d ask about what warranty a used car has and look into extended warranties if it didn’t have one. A house costs a lot more.”