Home Warranty: Who Pays?

In the middle of a real estate transaction, one question often creates confusion for both buyers and sellers: Who pays for a home warranty? With multiple parties involved, including the home warranty company, agents, and lenders, understanding payment responsibility is not always simple.

A home warranty offers coverage for critical home systems and appliances, providing valuable financial protection in case of breakdowns. But knowing whether the seller’s home warranty is included in the deal or if the buyer needs to purchase coverage separately can make or break negotiations.

This article explores every angle of home warranty payments—covering scenarios where the seller pays home warranty, situations where buyers invest in protection, and how agents handle warranties during closing. You’ll also learn about costs, payment methods, and special cases so you can make informed decisions.

Who Typically Pays for Home Warranties?

The short answer: it depends.

In many real estate deals, a home warranty is considered a negotiable item, just like seller concessions, repair credits, or other closing costs. Here are the most common scenarios:

• Seller-Paid Coverage: Many sellers provide a seller’s home warranty as part of the transaction. This makes the property more appealing and reduces post-closing disputes.
• Buyer-Paid Coverage: Buyers sometimes pay for coverage themselves, especially if they want a particular home warranty plan or if the seller is unwilling to contribute.
• Negotiated Cost Sharing: In competitive markets, buyers and sellers may split the cost of the warranty as part of the overall real estate transaction.

Quick Tip: Ask your real estate agent to confirm how warranties are typically handled in your local market. The agent can also help you understand how a home warranty works.

When Sellers Pay for Home Warranties

The seller pays home warranty plan costs in many real estate transactions, and for good reason.

Why Sellers Offer Warranties

• Competitive Edge: A listing with a warranty included stands out, reassuring home buyers. Homeownership can be intimidating for a new homeowner. Covering repair costs of electrical systems, home appliances and other items such as the garbage disposal can be key factors in selling a home.
• Increased Buyer Confidence: A seller’s home warranty offers protection for covered appliances and home systems, reducing the buyer’s perceived risk. The air conditioning system and major appliances such as the washer, dryer, refrigerator and water heater will be protected against costly appliance repairs due to normal wear and tear with a warranty contract for the first year. The seller may also cover the swimming pool and well pump for unexpected repairs with a home warranty policy.
• Closing Leverage: By rolling the warranty into closing costs, sellers can remove objections and speed up the sale.

Costs for Sellers

• Investment: Most home warranty plans cost between $350 and $600 per year. This is a small investment compared to larger concessions like paying thousands toward repairs.
• Value Exchange: Offering a warranty often prevents tough negotiations over inspection issues, saving time and money.

Implementation

Sellers typically arrange warranties through a home warranty provider during listing preparation. Their real estate agent ensures it is noted in the contract and rolled into the closing costs for a seamless process.

When Buyers Pay for Home Warranties

Not every transaction includes seller-paid coverage. Buyers often choose to purchase their own home warranty coverage, either during or after closing. In a seller’s market, extra perks such as a home warranty often won’t be offered by the seller.

Why Buyers Pay

• Peace of Mind: Knowing that major home systems are protected helps buyers settle in with confidence.
• Flexibility: Buyers can select from the best home warranty companies and choose the coverage that fits their needs.
• New Home Situations: Even in a new home, buyers sometimes purchase additional protection beyond builder warranties.

Cost Analysis

• Upfront Cost: The average cost of a home warranty is $350–$600 annually.
• Service Fee: Buyers also pay a per-claim service fee, usually $75–$125.
• Post-Closing Purchase: Buyers can buy directly from a home warranty company even after the transaction is complete.

For more details, see what do home warranties cover to understand what’s included.

Also, here’s a brief video that gives you a clear idea of what our Sears Protect Plan covers:

Home Warranties in Real Estate Deals

A real estate transaction often comes down to negotiation—and warranties are no exception.

Negotiation Tool

Buyers may request a warranty in their offer, especially for older homes. Sellers may offer it proactively to secure stronger offers.

Role of Real Estate Agents

The real estate agent often facilitates communication with the warranty provider and ensures the service contract is attached to the purchase agreement.

Closing Process

Warranties are usually added to the buyer’s real estate closing costs, which are settled at closing. Coverage typically activates the day ownership transfers.

Documentation

Every detail—such as who pays, what plan is chosen, and when coverage begins—should be spelled out in writing to avoid disputes.

Home Warranty Costs and Payment Structure

While costs vary, here’s what you can expect:

Key Payment Details

• Annual Fees: Paid upfront or rolled into closing costs.
• Service Fee: Ongoing responsibility of the homeowner when repairs are requested.
• Payment Methods: Credit card, check, or escrow at closing.
• Timing: Payment must be arranged before closing if included in the contract.

Unique Home Warranty Payment Situations

Not every transaction fits neatly into buyer-paid or seller-paid categories.

• Builder Warranties: Some builders provide limited coverage for new homes. The builder may have their own service provider cover a service call for plumbing problems or electrical system failures for the first year (or sometimes longer). Buyers may still purchase broader coverage from a home warranty company.
• Competitive Markets: A warranty can help a seller’s offer stand out in a competitive real estate market.
• Repair Credits: Instead of offering repair money, sellers may provide a warranty as a cost-effective alternative.
• Regional Variations: In certain states, it’s common practice for the seller to provide the warranty.

For many, home warranties are worth it because they provide financial protection against repair surprises—coverage that complements, but does not replace, homeowner’s insurance.

The question of who pays for home warranty doesn’t have a one-size-fits-all answer. Sometimes the seller’s home warranty is included in closing costs, other times the buyer opts in, and often it’s a negotiable part of the real estate transaction.

What matters most is ensuring the warranty is documented in writing and that both parties understand what’s covered. Whether you’re a buyer looking for peace of mind, a seller hoping to close faster, or an agent navigating negotiations, a home warranty can add value and security.