Legal Definitions - home warranty

A home warranty is a service contract designed to protect homeowners from the high costs of repairing or replacing major systems and appliances in their homes that break down due to normal wear and tear. This agreement typically covers items like heating and air conditioning systems, water heaters, and kitchen appliances for a specific period, often starting when a house is sold. It provides financial protection against unexpected failures, offering peace of mind to homeowners by arranging for qualified technicians to address covered issues.

Here are a few examples to illustrate how a home warranty works:

• Example 1: Unexpected HVAC Failure

  Sarah and Tom recently purchased an older home. As part of their closing agreement, the sellers provided a one-year home warranty. Three months after moving in, their central air conditioning unit suddenly stopped working during a heatwave. Instead of having to find a repair technician and pay potentially thousands of dollars out-of-pocket, Sarah and Tom contacted their home warranty provider. The provider dispatched a licensed technician, and after diagnosing a compressor failure due to normal wear and tear, the warranty covered the cost of repairing the unit, minus a small service fee.

  This example illustrates a home warranty covering the repair of a major housing system (HVAC) due to a breakdown from normal use, protecting the new homeowners from significant unexpected expenses shortly after purchasing their home.

• Example 2: Appliance Breakdown in a Resale Home

  When David bought his house, which was built in the 1990s, he opted to purchase a home warranty for added protection. Six months into owning the property, the built-in dishwasher, which was original to the house, stopped draining properly. David filed a claim with his home warranty company. After a technician confirmed the issue was due to age-related deterioration, the warranty covered the cost of replacing the old dishwasher with a comparable new model, significantly reducing David's financial burden.

  This scenario demonstrates how a home warranty can cover the replacement of a major household appliance due to deterioration, providing a safety net for homeowners of older properties against the failure of aging equipment.

• Example 3: Seller's Incentive for Buyers

  Maria was selling her house, which had a five-year-old water heater and an oven that was nearly ten years old. To make her property more appealing to potential buyers and alleviate any concerns about the age of these systems, Maria decided to include a one-year home warranty with the sale. The buyers, a young couple, appreciated this gesture, knowing that if the water heater or oven failed within the first year, they would be covered. This helped them feel more confident in their purchase decision.

  Here, the home warranty serves as a valuable incentive offered by a seller, providing assurance to buyers that major systems and appliances are protected against unexpected breakdowns for a set period after the sale, thereby facilitating the transaction.