When putting your home on the market, the last thing you need is a major appliance or system breakdown that costs time and money to repair. Not to mention it could hurt your home’s purchase price or ruin a pre-closing deal.

A seller’s home warranty is one option that can protect you. Pays to repair or replace essential home features. Homebuyers are often advised to get them, especially if they are buying older or older properties, starting with knowing when the equipment is due. But there are also home warranties aimed at home sellers. Here’s how they work and the benefits they can bring.

What is a seller’s home warranty?

Home warranties are service contracts that cover the costs of repairing or replacing certain systems and equipment as specified in the agreement. They are similar to manufacturer’s warranties except that they cover many things in the home instead of just one product.

Most home warranties cover major appliances (ranges, refrigerators, washer/dryers), electrical wiring, plumbing, and heating and air conditioning (HVAC) systems. Although the level of protection can vary and be tailored, it does not cover problems with windows, doors, floors or other structural features or furniture.

A seller’s home warranty is a version of this protection. Purchased by the current homeowner, it covers a limited period of time: the time between the first listing and the final closing. After the home is under contract and home inspections and walk-throughs are in effect, all showings are in effect until the checks and keys are exchanged. (And sometimes a little longer, because bonds are usually paid on a month-to-month basis.)

A seller’s home warranty provides financial protection if a major appliance or system in the home goes wrong before the sale is completed. Because it typically covers only a limited period of time, it is sometimes called a limited home warranty. However, it can be limited in other ways, because it doesn’t offer as many options or cover all the items (especially small, exempt items) that standard home warranties often do. There may be a service charge for an actual visit by a maintenance person.

What does a seller’s home warranty cost?

Consumer Affairs.com reports that the average home insurance policy costs between $36 and $68 per month, and can run from $264 to $1,425 per year. Because of their limits, seller’s home warranties are a little cheaper: on average, $300 to $600 a year, or $25 to $50 a month, Angie said. Of course, there are many variables to consider, including the provider, the level of coverage, and the discounts that may be available to you. If you’re a senior or a member of the military, for example, you may be able to get a lower rate for your seller’s home insurance.

You may also be able to get a seller’s home warranty quote that is covered for you. Sometimes, home insurance companies don’t charge a deposit if the seller agrees to buy a new owners plan for the home, or to buy a home insurance plan through the company for their next home.

In such cases, the seller’s warranty will come out of the proceeds of the sale of your home. This means it’s not technically “free”, but it does mean you’re not paying directly for the warranty up front, which makes it even more attractive.

Transferring home insurance

In most cases, the seller’s home warranty is transferred to the buyer. If you can have peace of mind knowing that if something goes wrong after moving in, the warranty will cover the cost of repairs, this may encourage the buyer to make an offer.

“The seller’s warranty can cover the buyer at closing and the new owner when it’s paid off,” says Amy Cherry Taylor, who runs a foreclosure firm in Fredericksburg, Virginia. “Then buyers have the option of renewing it or letting it go.”

To transfer a seller’s home insurance to a buyer, you must notify the home insurance provider that you want to change coverage. For the remaining period of the contract, they start transferring the warranty from the seller to the buyer.

The buyer may also be able to extend the coverage for a competitive price. Some insurance providers charge a small transfer fee, and who pays for that fee should be negotiated as part of the transaction.

It’s not uncommon for a seller to purchase home insurance for the new homeowner, which typically covers the cost of the first year of occupancy. This helps the buyer feel secure in their purchase and eases any negotiations to close the sale. Sometimes the buyer’s realtor will offer to cover the cost of the warranty for them.

Why should a seller buy a home warranty?

Sellers should consider purchasing a seller’s home warranty to provide themselves with additional coverage. If something goes wrong with major appliances or systems, they won’t have to worry about fixing them – spending money on the home they want to unload. It helps if a breakdown occurs during the home inspection, but is also useful if any issues are discovered during the home inspection or after an offer is made.

“A seller’s warranty can be an effective selling tool to show the buyer that they are buying a low-risk home,” says Taylor. “Many purchase contracts still include limited buyer inspections, even in a transitional market, so a seller’s warranty can set your home apart from other active listings.”

A seller’s home warranty can be an incentive for buyers who feel confident that they won’t be exposed to an unexpected and costly breakdown or system failure when closing on a new home. Both sides of the transaction can be protected in the process, and after the sale is completed, the protection is easily transferred to provide that extra bit of security.

It’s true, when you buy a seller’s home warranty, you may be spending money on something you may never need or use. In a way, its main function is to provide peace of mind in the real estate journey – one less thing to worry about in an often stressful endeavor.