Home Warranty Programs

Here is what you need to know about home warranty programs for the real estate licensing exam:

What is a home warranty program?

You can think of a home warranty program as an extended warranty for a home.  You can purchase an extended warranty for a car in case it breaks down, so why not for a house?  There are home warranty programs for new homes and used homes.  Of course, the warranty is designed to cover a home’s systems and appliances from breakdowns caused by normal wear and tear.

How is a home warranty program different than homeowners’ insurance?

Although insurance companies sell both property insurance and home warranty policies, they are both very different.  Homeowners’ insurance covers damage to the property by a covered peril.  A peril is a cause of loss, such as fire or lightning.  However, homeowner’s insurance won’t do a thing if your washing machine stops working.

So, what is covered then by a home warranty program?

You must know this about home warranty programs for your real estate licensing exam.  So long as they are in working order when the Home Warranty Programcontract begins, a home warranty program will cover a home’s appliances and crucial systems.  Items such as plumbing, electrical, and heating systems; a/c; hot water tank; and major appliances.

The policies will usually include a deductible, have limitations and exclusions and specific requirements.  If something needs to be repaired the homeowner is generally required to pay a trade call fee, which is a fee paid to the service provider that comes to the home to evaluate the issue.

How long does a home warranty program provide coverage?

It depends on the policy.  Usually, the coverage can run anywhere from one to 10 years.

Who pays for the home warranty program policy?

Again, this depends.  It could be a builder if it is a new home, a seller or buyer in a used home transaction, or even a real estate broker.  A broker could use the home warranty as a way to market the property to potential buyers.

Here is a sample home warranty real estate license exam question:

Which of the following is NOT correct about Home Warranty policies?

A.  They may be purchased by either the buyer or the seller
B.  They cover major appliances, plumbing and heating systems
C.  They are required in order to close escrow
D.  They are underwritten by private insurance companies

Answer:  C

Explanation:  Although they are optional, Home Warranty policies may be purchased by either the buyer or the seller to cover major appliances, plumbing and heating systems, etc.

What else can help me prepare to pass my real estate licensing exam on my first attempt?

Other tips to help you pass your real estate licensing exam on your first attempt:

Real Estate Test Taking Tips

How to Pass the Real Estate Exam

Real Estate Exam Math Made Easy

Also, check out our question of the day videos on our YouTube channel:

PassMasters Real Estate Exam Prep YouTube Channel