Home Warranty Paid By Seller...Standard Practice? (negotiation, agent, commission)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Someone close to me recently purchased an older home. The home came with a one year home warranty as part of the deal (from the seller's side).
The seller was charged, by his realtor, approximately $300 for the cost of the home warranty. I've been told by other realtors that realtors can buy the warranties at a discount and that it costs them approximately $75.
So did the seller's realtor pocket the $225 difference?
I had assumed when listing realtors are offering home warranties that it was coming out of their own commission - it's a marketing tool after all - is this not the case?
Are realtors passing on the cost of the warranty to sellers and are they profiting by it? Or was this an exception?
Last edited by riveree; 08-07-2007 at 09:10 PM..
Reason: grammar
Normally the home warranty purchases are all handled through the escrow company (around here they are, anyway). The "extended" coverage costs about $400 through most of the HW companies. I'm an agent, and I purchase the home warranty as a gift for my sellers. I don't get any kind of a discount. It costs me what it would cost the seller. I like home warranties as a marketing tool. Anything that I can do to help my seller get his home sold more quickly also means that I will get my commission sooner, too. (Remember I don't get paid unless the place sells.) The Home Warranty will cover the seller during the listing period and it covers the buyer for the 1st year in the house. I do this because it helps an older home compete against a new home; it gives peace of mind to the buyer that they won't have to incur a big repair cost during the first year (and they can renew the policy thereafter); and some policies will even cover the seller for liability issues.
Maybe where part of the confusion is coming from: The seller's coverage during the list period is usually about $75 (some companies will do it for free) IF a home warranty is purchased for the buyer (that usually runs about $400-$450).
Wow Gretchen B, that's a nice thing to do for your sellers. It also saves headaches for everyone, especially for the sellers and you, after the sale is complete. If something goes wrong, instead of the buyers trying to come back for the $$$ to fix the problem on their newly purchased home, they have recourse with the warranty company. That's the biggest benefit to the seller and listing agent, as I see it.
BTW riveree, I am not a licensed RE professional. I am just a past buyer and residential investor (not flipper). In all of my purchases, the seller has always paid for a home warranty out of their sle proceeds. It is not a required purchase on their part, nor is it always expected, but it is very common in my area on used single fmaily homes.
I also recently completed the purchase of a new home in Nevada. As part of the negotiation, the builder/seller agreed to purchase a new home extended warranty for me. Since the new home is covered by a builder's warranty during year-1, the aftermarket warranty covers years 2-4. With all the add-ons over the basic warranty, the New Home year 2-4 product was something around $550 for the remaining 3 year period. I don't have the exact price because it was paid for by the seller and not me.
If the initial response from the builder/seller was any indication of their experience with extended warranties, this kind of thing appears to not be a standard practice in my new area. However, just because it's not usual doesn't mean it's impossible. In my case, I was very specific about the company and plan that I wanted, and they agreed to it and paid for it out of their sales proceeds.
In my area, the home warranty, if there is one, can be paid by any of the players, buyer, seller, agent. The buyer generally never does. The seller or agent usually does it. Here, if the agent arranges for the home warranty, the cost is generally around $325 and depending on the warranty company, a refund of $50-100 is sent to the brokers office after payment for the policy.
Around here it seems to be. I haven't seen a contract without a home warranty in a while.
I have never heard of buying them at a discount, but I do know that there are home warranty companies that will give realtors a referral fee of $50-$60 for each one they send in. It's not something we will do, but I know it is done at other companies.
Normally the home warranty purchases are all handled through the escrow company (around here they are, anyway). The "extended" coverage costs about $400 through most of the HW companies. I'm an agent, and I purchase the home warranty as a gift for my sellers. I don't get any kind of a discount. It costs me what it would cost the seller. I like home warranties as a marketing tool. Anything that I can do to help my seller get his home sold more quickly also means that I will get my commission sooner, too. (Remember I don't get paid unless the place sells.) The Home Warranty will cover the seller during the listing period and it covers the buyer for the 1st year in the house. I do this because it helps an older home compete against a new home; it gives peace of mind to the buyer that they won't have to incur a big repair cost during the first year (and they can renew the policy thereafter); and some policies will even cover the seller for liability issues.
Maybe where part of the confusion is coming from: The seller's coverage during the list period is usually about $75 (some companies will do it for free) IF a home warranty is purchased for the buyer (that usually runs about $400-$450).
I wish you were my agent we had to buy it ourselves and my home is new..
Home warrantee is paid by the seller,the agents, the buyer requests it, it's up to the seller's decision,yes or no. The buyer's agent sometimes would buy for the buyer as an appreciation.
Home warranties can be purchased by anyone. Your next door neighbor can purchase one for his house (that he has lived in for 15 years) if he chooses to. The cost in my area is about $400.00. Realtor's can not buy them at a discount.
I know when my friend was an agent she would always "upgrade" the home warranty for her clients. It usually cost her $40, but it was a nice thing to do.
I was just suprised that the cost of the warranty came out of the seller's side.
This was a modestly priced older home (50+ year old home), so I know the warranty is a nice bonus, but I just assumed the listing realtor was the one who paid for it......I guess that's not always the case.
I'm curious because I will be putting a similar home on the market soon (not my primary), and a warranty might help with the marketing, but I'm not so sure I want to spend $300+ for it. I just don't think the potential buyers will value it as such - it will probably be viewed as another "freebie" and they won't consider it when they make their offer.
Unless the listing realtor will pay for it entirely, I don't think I want one after learning this .
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Wow you are a nice agent!!!
.
