Definition:
Warranties in real estate are promises or guarantees—usually in writing—that certain aspects of a home or its systems (like appliances or structures) will be repaired or replaced if they fail within a set time period after purchase.
Explanation:
In a real estate deal, warranties can come from the builder, the seller, or a third-party home warranty company. These warranties typically cover repairs to systems like plumbing, heating, electrical, and sometimes major appliances for a limited time—often one year. Warranties are especially common in the sale of newly built homes, where the builder might provide coverage for defects in materials or workmanship. In resale homes, a seller may offer a home warranty to reassure the buyer and make the listing more attractive.
It’s important to understand what a warranty does—and doesn’t—cover. For example, a warranty might fix a broken water heater but not damage caused by poor maintenance. Buyers often purchase their own warranties for added peace of mind after moving in.
Example of Warranties
Samantha buys a home, and her seller includes a one-year home warranty in the sale. Three months after moving in, the air conditioner breaks down. Samantha contacts the warranty company, pays a small service fee, and they send a technician to fix the issue—saving her hundreds in repair costs.
Why is Warranties Important in Real Estate Transactions
Warranties help reduce risk for both buyers and sellers. Buyers feel more confident knowing unexpected repairs might be covered after they move in. Sellers can make their homes more appealing by offering warranties as part of the deal. In short, warranties provide a safety net, protect against surprise repair costs, and can even help smooth the negotiation process during a home sale.