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Home Warranty Strategies: Up Front Offers vs. Contract Negotiations – Which is Best?

Home Warranty Strategies: Up Front Offers vs. Contract Negotiations – Which is Best? Buying a home is one of the most significant investments a person can make. To protect this investment, many buyers consider home warranties, which offer coverage for repairs and replacements of major home systems and appliances. But should these warranties be offered up front, or is it better to negotiate them into the purchase contract? Let’s explore the pros and cons of each approach, focusing on costs, coverage, and potential pitfalls.

Pros of Offering Home Warranties Up Front

  1. Peace of Mind: Buyers gain immediate reassurance knowing that their new home is protected from unexpected repairs.
  2. Streamlined Process: With the warranty included up front, there’s no need for additional negotiations, simplifying the transaction.
  3. Enhanced Buyer Confidence: Offering a home warranty can make the property more attractive to potential buyers, potentially speeding up the sale process.
  4. Predictable Costs: Buyers know the exact cost of the warranty from the beginning, avoiding surprises later.
  5. Seller Coverage During Listing: Some home warranty companies offer coverage for sellers during the listing period, ensuring any issues that arise, even from a home inspection, are taken care of.

Cons of Offering Home Warranties Up Front

  1. Higher Initial Costs: Sellers might have to absorb the cost of the warranty, potentially reducing their net proceeds from the sale.
  2. Limited Coverage Awareness: Buyers might not thoroughly investigate the coverage details up front, leading to misunderstandings about what is actually covered.
  3. Potential for Overlooked Hidden Terms: Some warranties come with hidden terms, conditions, and deductibles that may not be immediately apparent, leading to unexpected out-of-pocket expenses.

Pros of Negotiating Home Warranties in the Purchase Contract

  1. Flexibility in Selection: Buyers have the opportunity to choose a warranty that best suits their needs and preferences.
  2. Cost Negotiation: There’s room to negotiate the cost of the warranty, potentially resulting in a better deal for the buyer.
  3. Detailed Examination: Buyers are more likely to thoroughly review the terms and conditions of the warranty when negotiating it into the contract, ensuring they understand what is and isn’t covered.

Cons of Negotiating Home Warranties in the Purchase Contract

  1. Extended Negotiation Time: Adding warranty negotiations can prolong the closing process, potentially delaying the sale.
  2. Risk of Omissions: In the rush to close the deal, important details about the warranty coverage might be overlooked.
  3. Inconsistent Coverage: There’s a chance that the negotiated warranty may not offer as comprehensive coverage as a pre-selected one provided up front.

Legal Considerations for Home Warranties

Home warranties have been the subject of numerous lawsuits, often due to disputes over coverage and claim denials. Here are some key points to consider:

  1. Claim Denials: Many homeowners have filed lawsuits against home warranty companies for bad faith denial of claims. For example, if a home warranty company refuses to cover a repair that should be included under the policy, the homeowner can take legal action.
  2. Small Claims Court: Homeowners can file a lawsuit in small claims court if they believe their claim was wrongfully denied. In Ohio, the maximum amount that can be sued for in small claims court is $6,000, exclusive of interest and costs. Claims exceeding this amount must be pursued through other legal avenues.
  3. State Department of Insurance: Homeowners can file a complaint with their state’s Department of Insurance if they believe their home warranty company acted improperly.
  4. Better Business Bureau (BBB): Filing a complaint with the BBB can sometimes resolve disputes without going to court. Companies with good ratings may work harder to maintain their reputation.
  5. Case Examples: One notable case is Dewey v. Select Home Warranty LLC, where the plaintiff filed a lawsuit against the company for failing to honor the warranty agreement.
  6. LLC Representation: In Ohio, an LLC must be represented by an attorney in small claims court. This requirement ensures that the legal representation is professional and knowledgeable about the intricacies of business law.

Advantages of Using a Flat Fee MLS Listing Broker (Ohio Broker Direct)

  1. Cost Savings: Using a flat fee MLS listing broker can save sellers thousands of dollars in commission fees compared to traditional real estate listings.
  2. Enhanced Marketing Exposure: Flat fee MLS listings provide the same Multiple Listing Service (MLS) exposure as traditional listings, ensuring your property reaches a broad audience.
  3. Control Over the Selling Process: Sellers maintain control over pricing, negotiations, and scheduling, allowing for a more personalized selling experience.
  4. Direct Leads: With Ohio Broker Direct, sellers receive direct inquiries from potential buyers, increasing the chances of a quicker sale without the need for buyer agents.
  5. Expert Guidance: Ohio Broker Direct offers the expertise of seasoned real estate brokers, ensuring sellers receive professional advice and strategic insights.

Final Thoughts

Choosing which home warranty strategies to employ—whether to offer a home warranty up front or to negotiate it into the purchase contract—involves weighing costs, coverage, and potential risks. Offering a warranty up front can simplify the process and provide immediate peace of mind, but it may come with higher initial costs and less awareness of coverage details. On the other hand, negotiating the warranty within the purchase contract allows for more flexibility and detailed examination but may extend the negotiation process and result in inconsistent coverage. Ultimately, the best approach depends on the specific circumstances of the buyer and seller, as well as their priorities in the home buying process.

Ohio Broker Direct & its Brokers or Associates assumes no responsibility or liability for any errors or omissions in this blog, we advise all participants in buying or selling real estate to enlist the services of a Real Estate Attorney.

About the Author

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Joan Elflein, Principal Broker and founder of Ohio Broker Direct, has been a trailblazer in the real estate industry since 1983. She established Ohio Broker Direct, a flat-fee brokerage firm, to champion ethical practices and client empowerment. Joan's innovative services have saved Ohio sellers millions in commissions and earned her firm an A+ Better Business Bureau rating. With over a billion dollars in transactions, you can ensure Joan's decades of experience will provide top-tier professional service and personal care in every interaction. 

Tana Lantry, Senior Broker at Ohio Broker Direct, brings over a decade of expertise in business, commercial, and residential real estate. As the 2017 President of the Columbus Independent Brokers Association, Tana drove change and expanded membership growth. She excels in guiding clients through home buying/selling, commercial sales, and 1031 exchanges. With extensive experience in Self-Directed IRAs, Tana provides comprehensive guidance for real estate investments. Together, Joan and Tana offer unparalleled expertise and dedication, ensuring the highest standards of professionalism and care at Ohio Broker Direct.

Have Questions?

If you have any questions regarding the for sale by owner process, or how we can help you save money while selling your home, please don’t hesitate to contact us today. We will happily answer any questions you may have, and look forward to working with you in selling your home.

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