Discover the Benefits of Residential Service Contracts
A residential service contract, often referred to as a home warranty, is an insurance-like policy covering the plumbing, mechanical, and electrical systems of your home. Typically valid for one year, these contracts provide financial protection for homebuyers by covering repair or replacement costs for various household systems and appliances. Importantly, either the buyer or the seller can pay for this contract, offering flexibility during the home purchase process.
An Illustrative Example
Imagine Ricky and Rebecca Miller, who recently purchased a new home. Keen to protect their investment, the sellers opted to pay $500 for a residential service contract on behalf of the Millers. This decision proved beneficial when, just three months later, the air-conditioner compressor broke down. The repair bill amounted to $800. Thanks to the service contract, the Millers only needed to pay a $100 deductible, with the remaining $700 covered by the warranty.
Key Features
- Coverage Scope: These contracts can cover a range of home systems including plumbing, electrical, and mechanical systems such as HVAC units.
- Cost Management: Helps in managing unexpected repair or replacement costs, providing peace of mind for homeowners.
- Flexibility: Either party in the home purchase transaction can choose to buy the contract, providing financial negotiating leverage.
Frequently Asked Questions
1. What typically is covered under a residential service contract?
Residential service contracts cover major home systems such as plumbing, electrical, HVAC systems, and certain home appliances like ovens and washing machines.
2. Who can purchase a residential service contract?
Both the homebuyer and the seller can purchase a residential service contract. In many transactions, sellers offer this contract as an incentive to potential buyers.
3. What costs should I expect?
While the cost varies, these contracts typically range from $300 to $600 annually. Additionally, homeowners might need to pay a deductible for each service call, commonly around $50 to $100.
Related Terms: Home Insurance, Home Maintenance, Home Purchase Agreement, Home Seller’s Agreement.
