Is a home warranty included in closing costs?
Whether a home warranty is included in closing costs depends on the situation. In some real estate transactions, a home seller will include a home warranty in the closing costs. For other cases, a real estate agent may gift coverage to a buyer, so it won’t appear in closing costs. In still others, a home buyer may purchase a home warranty on their own after closing. Today, we’ll look at each scenario and how it can affect you as a homeowner.
When is a home warranty included in closing costs?
There’s one common situation in which a home warranty is included in closing costs. It’s when a seller decides to include coverage for the buyer as part of the transaction. This is different from purchasing seller coverage. (You can read about why you may want seller coverage here.) Let’s see when a home warranty might be included in closing costs and why it’s a win-win for buyers and sellers.
When the seller buys a home warranty for the buyer
A home seller may buy a home warranty for a buyer and include it in closing costs. There are a few reasons why a seller might do this.
- As an incentive. According to the National Association of Realtors’ 2019 Profile of Home Buyers and Sellers, including a home warranty was the incentive that Sellers used most to entice buyers (p. 120). Sellers who offer a home warranty are more likely to sell their home than those who don’t.
- To provide peace of mind. Buying a house is a huge commitment. A home warranty helps give buyers peace of mind that if a major system or appliance breaks down, they’ll have a solution. With so many things to worry about immediately after moving in—such as settling in and getting acquainted with the neighborhood—a home warranty can take some of the stress off a new homeowner’s shoulders. And the less a buyer has to worry about breakdowns, the more likely they are to buy.
While a seller may include home warranty coverage in closing costs, buyers and their agents can negotiate who ultimately pays for it.
Overall, when a seller includes a home warranty in closing costs, it’s a win-win. The seller’s home looks more attractive, and buyers get protection against breakdowns at a crucial time—right after the down payment.
When ISN’T a home warranty included in closing costs?
When a seller chooses not to include coverage, it won’t appear in closing costs. In that case, buyers have two options to get home warranty coverage.
When a real estate agent buys one as a gift
If your agent provides you home warranty coverage as a gift, it won’t appear in closing costs.
Many real estate agents gift home warranty coverage to their buyers as a matter of course. If your agent does this, you’d get one full year of systems and appliances protection against covered breakdowns caused by normal wear and tear. This is especially useful if you buy an older home with older systems and appliances. The older things are, the more likely they are to break down.
Some agents will ask if you have a preference in a home warranty company. But most will have done their research and chosen coverage from a trustworthy provider like 2-10 Home Buyers Warranty (2-10 HBW). That’s because the best real estate agents want you to thrive as a homeowner, and a home warranty can help you do that.
When the buyer purchases one themselves
Sometimes, neither the seller nor your real estate agent will include a home warranty at closing. But what if you still want access to a trustworthy, easily accessible network of service providers? And what if you want the freedom to budget properly and be prepared for unexpected breakdowns?
Fortunately, you can purchase a home warranty plan and personalize it with 2-10 HBW.
Purchasing a home warranty from 2-10 HBW for yourself lets you get the coverage you need at a price you want. It reduces the time and frustration of finding, researching, and vetting service technicians, because we do it for you. And it makes budgeting for unexpected breakdowns easier, because your service contract always tells you when you’re covered.
Whether a home warranty appears in closing costs or not, it’s a smart investment for homeowners. Home ownership and upkeep can be time consuming and expensive, especially with how much more we’re all using our systems and appliances these days. A home warranty can give you time back when addressing breakdowns and help protect your budget.
2-10 HBW offers the most comprehensive home warranty coverage for homeowners. Let us help you protect your home.