How to Leverage Home Warranty for a Successful House Sale

Real estate has been hot recently. After the Great Recession turned most markets nationwide into Hellworld, things seemed hopeless. By 2013, though, sales began to pick up again. In Miami, for instance, condos bottomed out in April 2010 at $135,000. As of December 2019, the average unit sells for $318,000.

However, as good as the 2010s have been, markets across the country have begun to cool. In Miami, prices peaked in 2017. Since then, valuations have been stagnant or slowly declining.

The party may be over, but you can still sell LOADS of properties – if you’re motivated. Find ways to add massive value, and you’ll have a much greater chance of moving units than your competition does.

This goes beyond luxury staging or offering VR walk-throughs. For instance, including a home warranty can significantly increase the desirability of the properties you sell.

Below, we’ll lay out the business case for including this in your bag of tricks.

What are home warranties?

If you’re new to the property game, you might not know what a home warranty is. Put simply, they are service contracts that cover repair/replacements of systems and appliances.

Here’s how it works: Every month, you pay a premium to a home warranty company. Whenever an appliance or system breaks, the property owner calls their home warranty firm. After confirming that they cover the issue, the firm dispatches a technician to fix the problem.

Whenever the home warranty firm sends a repairperson, you pay a service fee, or a co-pay/deductible. This fee varies from one provider to another, but on average, you’ll pay $75-80 per call.

From a real estate agent’s perspective, these policies are attractive for two reasons. One: It makes life easier for those who own investment real estate. These entrepreneurs often own a portfolio of properties., which can make maintenance/repairs a headache. Whenever a tenant has an issue, one phone call usually takes care of the problem.

And two: It’s an add-on that appeals to homeowners who want to save money and time. Who wouldn’t want a service that promises to make their lives easier?

How much does a home warranty cost per year?

Home warranties sound like a great idea. However, at the end of the day, it all comes down to the numbers. Before a client purchases your listing, you’ll be on the hook for this service.

How much does a home warranty cost? That depends on two things – (1) the plan you choose and (2) the number of service calls you make.

According to Realtor.com, costs range from $300 for basic plans to $600 (or more) for premium plans. That means you’ll need to budget as much as $50 per month, per property.

Then, there are service fees. Resale homes are getting older with every passing year. According to the National Association of Home Builders, the average American home is 37 years old. It follows that investment real estate, which tends to be older, will require more service calls.

We recommend budgeting for five calls per year. Using the figures cited earlier, that means adding an extra $400/year, or $34/month per property to your expense column. If the property is relatively new (<10 years old), a three call buffer, or $240/year, will suffice.

Don’t just buy any home warranty, though. Each policy is different. Start your plan search here – on ReviewHomeWarranties.com, you’ll find detailed breakdowns by coverage, terms, and price. This way, you’ll get the most value per dollar spent – and so will your clients.

Why properties with home warranties sell faster

Still skeptical? We expected that – good realtors take time to do their due diligence. So, allow us to expand further on why we think home warranties are a good investment.

Earlier, we talked about the cost and time savings that a home warranty offers. However, we neglected to mention the peace of mind factor. Buyers want to feel secure – after all, a home is the biggest purchase most of us will ever make.

Not only do home warranties make buyers more likely to convert, but it also increases the selling price. According to a Service Industry Council study, properties with home warranties sold for $2,300 more than those without. In other words – the higher the selling price, the bigger your commission.

Houses with home warranties attached also move faster. According to that same study, properties with a home warranty spent eleven fewer days on the market. Many sellers want to divest themselves of their property ASAP – a home warranty can help with this.

Increase your edge – even in a cooling real estate market

Markets across the country have cooled significantly over the past few years. If you want to thrive, let alone survive, you need every advantage you can get your hands on. Properties that have home warranties sell faster, and for more than comparable homes.

For $50/month or less, you couldn’t ask for a better short-term investment.

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