Home Warranties: What They Cover, What They Don't, and When They Make Sense

General Real Estate · NW Metro Atlanta

Home warranties come up in almost every Georgia real estate transaction, and most buyers and sellers only half-understand what they do. A home warranty isn't insurance. It doesn't fix everything. It has real limits and real exclusions. Used well, it reduces friction in the first year of ownership and gives sellers a modest competitive edge during listing. Used without understanding, it leads to disappointment and claims disputes. Here's a REALTOR's view of how home warranties actually work in NW Metro Atlanta transactions, what buyers and sellers should expect, and when they're worth the cost.

"The buyers and sellers I work with across Cobb and Cherokee who are happiest with home warranties are the ones who understood the limits going in. The disappointment comes from assuming it covers more than it does, not from the product itself."

Marna Friedman, REALTOR®, Atlanta Communities

What is a home warranty, really?

A home warranty is a service contract that covers repair or replacement of specific systems and appliances in the home when they fail from normal use. It's not insurance. It doesn't cover damage. It doesn't cover structural issues. It doesn't cover acts of God. It covers the stuff inside the house that eventually breaks: the HVAC, the water heater, the kitchen appliances, the plumbing.

In a real estate transaction, a home warranty typically runs for one year from closing. It's purchased from a home warranty company (American Home Shield, Choice Home Warranty, and others serve the Georgia market), and either the buyer or the seller pays for it depending on how the contract is written. See my buyers and sellers pages for broader transaction context.

What's typically covered?

Standard home warranty coverage usually includes:

• HVAC system: heating, cooling, ductwork.
• Plumbing system: water heater, interior plumbing, leaks.
• Electrical system: wiring, panels, outlets.
• Kitchen appliances: refrigerator, range, dishwasher, built-in microwave.
• Laundry appliances: washer and dryer, if included in the plan.
• Garage door opener: motor and mechanical components.
• Ceiling fans, built-in appliances, hot water dispenser: often included.

Upgraded or premium plans add coverage for pools and spas, well pumps, septic systems, additional refrigerators, and sometimes roof leaks. Verify specifics with the warranty company for any plan you're considering.

What's typically not covered?

This is where buyers get surprised. Standard exclusions usually include:

• Preexisting conditions: if a system wasn't working at closing, the warranty won't cover it.
• Items damaged by lack of maintenance: if the HVAC fails because it was never serviced, the claim may be denied.
• Code violations and improper installation: systems that don't meet code or were installed incorrectly.
• Structural issues: foundation, framing, walls, roof deck.
• Pests, mold, asbestos: environmental issues.
• Cosmetic damage: scratches, dents, discoloration.
• Non-mechanical failures: cosmetic appliance issues that don't affect function.
• Items under manufacturer warranty: the manufacturer handles those claims first.
• Damage from acts of God: storms, floods, fire. That's homeowner insurance territory.

Read the specific contract. The exclusion list is often longer than the coverage list.

Home warranty coverage at a glance

The table shows typical coverage patterns across standard and upgraded plans.

Specifics vary significantly by warranty company and plan. Always read the actual contract.

How does a claim actually work?

The claim process is the same for most companies:

• You call the warranty company: not the service provider directly.
• They dispatch a contractor: from their approved network. You don't choose.
• You pay a service fee: typically $75-$150 per claim, called a service call fee or trade service fee.
• The contractor diagnoses: if it's covered and not excluded, the warranty company authorizes repair or replacement.
• Repair or replacement: up to the plan's coverage cap for that item category.
• If denied: the warranty company explains why; you can appeal.

Coverage caps matter. If your HVAC system fails and the plan caps HVAC coverage at $3,000, that's what you get toward a replacement, not the actual cost of a new system. Buyers who understand this don't get surprised.

Who pays, buyer or seller?

Both arrangements are common in Georgia transactions:

Seller-paid warranties. Seller buys a listing-period warranty for themselves (optional) and provides a 1-year warranty to the buyer at closing. This is a soft marketing feature. Modest cost (typically a few hundred dollars) and reduces one source of buyer anxiety.

Buyer-paid warranties. Buyer decides at closing or shortly after whether to purchase a 1-year warranty for themselves. Common when seller doesn't offer one.

Negotiated warranties. The purchase contract specifies who pays, which company, which plan tier, which add-ons. Spelled out in writing.

The economics are modest either way. A standard 1-year warranty typically costs $400-$700; upgraded plans can run $600-$900+. See my contract contingencies post for broader contract context.

When do home warranties make sense?

Patterns from buyers and sellers who feel they got value:

• Older systems in the home: HVAC approaching end of life, aging appliances, older water heater. A warranty is cheap insurance against failures in the first year.
• Buyers without a cash reserve for repairs: warranties smooth out unexpected costs with a known service fee instead of unpredictable repair bills.
• Sellers listing an older home: a seller-paid warranty answers buyer concerns about aging systems before they become negotiation points.
• New construction warranty tier: for existing homes near the end of builder coverage, continuing with a service warranty extends protection.

Situations where warranties produce less value: new homes with manufacturer and builder warranties still active, homes with very recent system replacements, and homeowners with cash reserves who prefer to self-insure.

How do home warranties interact with home inspections?

Buyers often think home warranties replace inspections. They don't. The two serve different purposes:

• Inspection identifies current condition: what's working, what's not, what's near end of life. Supports negotiation.
• Warranty handles future failures: if a working system fails from normal use within the warranty period.
• Preexisting problems revealed at inspection won't be warranty-covered: if the inspection flagged the HVAC as end-of-life, that's a preexisting condition the warranty company can exclude.
• Inspection is leverage; warranty is after-closing protection: different roles in the transaction.

Both have a place. Neither replaces the other. See my how home inspections work post for the full inspection framework.

How do home warranties fit into the full transaction documentation?

Beyond the warranty contract itself, a few related transaction documents are worth understanding:

• Purchase contract language: if seller provides a warranty, the contract specifies company, plan, tier, and any upgrades. Spell out details to avoid closing surprises.
• Seller disclosure interaction: seller disclosure covers known defects; warranty covers future failures. The two serve different purposes and shouldn't be confused.
• Inspection report relationship: warranty companies may ask for inspection reports when evaluating preexisting condition claims.
• Maintenance records: buyers who inherit regular HVAC and system maintenance records can document ongoing care, which supports claim approval.
• Transfer at closing: seller-provided warranties typically start on the closing date. Confirm the start and end dates in writing.
• Multiple-year options: some warranties offer 2 or 3-year terms at a modestly discounted total; worth evaluating for older homes.

Your buyer's agent handles the contract language around the warranty; your attorney reviews the broader contract. See my closing day process post for how all of this flows together at the end of the transaction.

Frequently Asked Questions

Is a home warranty the same as homeowners insurance?

No. Insurance covers damage from events like fire, storms, theft, and liability. A home warranty covers repair or replacement of systems and appliances that fail from normal use. You need both. One doesn't replace the other.

How much does a standard home warranty cost?

Typically $400 to $700 for a standard 1-year plan, higher for upgraded plans with pool, septic, or well coverage. Service call fees per claim are typically $75 to $150 and are additional to the plan cost.

Can I choose any contractor for a warranty claim?

No. Warranty companies dispatch their approved contractors. You can usually request a specific one if they're in the network, but you can't bring in your own.

What happens if the warranty company denies my claim?

You can appeal through the company's process. Common denial reasons are preexisting condition, lack of maintenance, improper installation, or code violation. Being able to document regular maintenance helps.

Should sellers offer a home warranty during listing?

For older homes or homes with aging systems, yes, often worth it. The listing-period coverage protects the seller during escrow, and the buyer coverage at closing is a modest marketing feature. For newer homes with current systems, the value is smaller.

Buying or selling in NW Metro Atlanta?

Home warranties are one small piece of a smooth transaction. I help buyers and sellers across Cobb, Cherokee, the Cedarcrest corridor, and Forsyth think through what to include in the contract and what matters at closing. Read my buyers page, my sellers page, or reach out to discuss your specific situation.

Marna Friedman is a licensed REALTOR® with Atlanta Communities Real Estate Brokerage serving NW Metro Atlanta. Home warranty coverage, exclusions, and pricing vary by company and plan; always read the actual contract. This article is general guidance, not legal or financial advice. Equal Housing Opportunity.