The San Marino Real Estate Report, as seen weekly in the San Marino Tribune
With today’s wild and crazy real estate market, sellers can often call the shots on the negotiable elements of the purchase agreement. If the home is desirable to many, buyers are having to get creative to get their offer to the top of the pile. Beyond the purchase price, people are resorting to tactics like dropping all contingencies, closing in very short time frames, and giving the seller a period of free lease-back. Buyers are pulling out all the stops to make their offer pleasing to the seller.
One option included in the purchase agreement is for the seller to provide the buyer with a home warranty. As the name implies, this is an insurance policy for the major systems and appliances in the house. Not every buyer will ask for one, and when the competition is extremely stiff, a buyer might decide to leave that option out. Even if a buyer does ask for one, a seller who is trying to maximize proceeds, might decide to counter the home warranty out of the agreement.
Things covered under most home warranty policies include:
Plumbing, stoppages, electrical, range/oven/cooktop, dishwasher, garbage disposal, central vacuum, ceiling fans, doorbells, telephone wiring, water heater, whirlpool tub, heating/heat pump, microwave trash compactor, hot water dispenser, exhaust fan, garage door opener.
Additional coverage could be added for central air conditioning, water softener, pool/spa, refrigerator, washer/dryer, well pump, and septic plumbing.
The policy kicks in after the close of escrow and will cover items laid out in the contract. If the air conditioning goes out during the first hot spell, the new owner can contact the warranty company, and they will send out a tradesperson to diagnose the problem. For a nominal service fee, this professional will get the air conditioning in working condition, even if it means they have to replace a component that is covered under the policy.
It is important for buyers to understand that home warranty company will repair or replace only covered items that fail due to normal wear and tear. A garbage disposal that is broken because your sweet boy decided to grind up his Star Wars action figure would not be covered under the policy. Also, they will not fix something that was broken before your bought the house. If the owners disclosed that the heating system on your new home has been non-operational since 1980, the warranty will not cover the replacement cost.
A standard warranty with air conditioning should run under $400, and I believe it is worth every penny. The buyers will be thrilled to be protected from unexpected issues during their first year. After making the major investment required to purchase a home, it is nice to know that there is protection in place in case a problem arises.
The benefit to the seller is a bit harder to perceive, but it is equally important for them. Most sellers are very diligent to keep the systems of there home in good working condition. Most have deep pride of ownership and feel responsible to pass on their home in excellent shape. Even with consistent care, though, things can go wrong. If the water heater dies just one week after escrow closes, it is nice to know that the buyers will call the home warranty company rather than calling you. The additional layer of protection that a home warranty provides limits any disagreements that could arise after escrow closes.
Most sellers are reaping huge rewards for selling their home in this current market. I have been surprised at the high prices my sellers have been receiving in the last few months. Even though the seller is in the power seat, I believe spending a few hundred dollars on a home warranty will be a “win-win” proposition.
For information about real estate in Pasadena, San Marino’s next door neighbor, go to Everything’s Coming Up Roses