What Is a Home Warranty in Real Estate?

A home warranty is a service contract that covers the repair or replacement of major home systems and appliances due to normal wear and tear. Buyers often use home warranties for added protection after closing.

How a Home Warranty Works

A home warranty functions as a protection plan. If a covered system or appliance breaks, the homeowner pays a small service fee and the warranty company arranges a repair or replacement. This is different from homeowners insurance, which protects against unexpected hazards like fire or storms.

  • Contract typically lasts 12 months
  • Covers systems like HVAC, plumbing, and electrical
  • Often covers appliances such as dishwashers and water heaters
  • Homeowners pay a service fee per claim
  • Warranty company selects the contractor

Example of a Home Warranty

A buyer purchases a home and the air conditioning system stops working three months after closing. Because the home has a home warranty, the buyer pays a $75 service call fee and the warranty company sends a technician to repair or replace the AC system, depending on the contract terms.

Why a Home Warranty Matters in Real Estate

  • Provides peace of mind for buyers during the first year of ownership
  • Helps reduce unexpected repair costs after closing
  • May make a resale home more attractive to buyers
  • Often negotiated as part of the purchase agreement
  • Related to the home warranty contingency in real estate contracts

Home Warranty vs Homeowners Insurance

A home warranty covers the repair or replacement of major systems and appliances due to normal wear and tear. Homeowners insurance covers sudden and unexpected events like fire, theft, or storms. Many buyers use both for full protection.

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